UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
   [X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

              For the Transition Period From _______ To _______

                         Commission File Number: 0-31903

                             VINA TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                               77-0432782
   (State or other jurisdiction of          (IRS Employer Identification No.)
            incorporation)


  39745 Eureka Drive, Newark, CA 94560                 (510) 492-0800
(Address of principal executive offices)      (Registrant's telephone number,
                                                    including area code)

     Securities registered to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.0001 per share
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

     The aggregate  market value of Common Stock held by  non-affiliates  (based
upon the closing sale price on the Nasdaq  SmallCap Market on June 28, 2002) was
approximately $5,435,329.

     As of March 6, 2003, there were 62,189,930 shares of Common Stock, $0.0001
per share par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Items  10 (as to  directors),  11,  12 and 13 of Part  III  incorporate  by
reference information from the registrant's proxy statement to be filed with the
Securities  and Exchange  Commission  in  connection  with the  solicitation  of
proxies for the registrant's 2003 Annual Meeting of Stockholders.

<PAGE>



                             VINA TECHNOLOGIES, INC.
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>



<S>                                                                                                <C>
PART I..............................................................................................3
 Item 1. Business...................................................................................3
 Item 2. Properties................................................................................11
 Item 3. Legal Proceedings.........................................................................11
 Item 4. Submission of Matters to a Vote of Security Holders.......................................11
PART II............................................................................................13
 Item 5. Market Registrant's Common Equity and Related Stockholder Matters.........................13
 Item 6. Selected Consolidated Financial Data......................................................14
 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.....15
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...............................32
 Item 8. Consolidated Financial Statements.........................................................33
 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure......55
PART III...........................................................................................55
 Item 10. Directors and Executive Officers of the Registrant.......................................55
 Item 11. Executive Compensation...................................................................56
 Item 12. Security Ownership of Certain Beneficial Owners and Management...........................56
 Item 13. Certain Relationships and Related Transactions...........................................56
PART IV............................................................................................56
 Item 14. Controls and Procedures..................................................................56
 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.........................56
    Signatures.....................................................................................59
    Certifications.................................................................................60
</TABLE>


                                       2
<PAGE>

                                     PART I

Item 1. Business

     When used in this  report the words  "may,"  "will,"  "could"  and  similar
expressions  are  intended to  identify  forward-looking  statements.  These are
statements  that relate to future periods and include  statements as to expected
net losses,  expected decline in product orders,  expected cash flows,  expected
expenses,  expected capital expenditures,  expected deferred stock compensation,
the extent of fluctuations in gross margins,  the adequacy of capital resources,
growth in operations,  the ability to integrate companies and operations that we
may  acquire,  expected  reduction  of  operation  costs,  our  ability to raise
additional funding within the first six months of 2003, our strategy with regard
to protecting our proprietary technology,  the ability to compete and respond to
rapid  technological  change,  the extent to which we can develop new  products,
expected  customer  concentration,  ability to execute our  business  plan,  the
extent  to  which  we  can  maintain  relationships  with  vendors  of  emerging
technologies,  the  extent  to which and at what rate  demand  for our  services
increases,  the  extent to which  the  telecommunications  industry  experiences
consolidation, our ability to expand our international operations and enter into
new markets,  the extent to which we and our ability to actively  participate in
marketing,  business development and other programs,  the extent to which we can
expand our field sales operations and customer support  organizations  and build
our infrastructure,  the extent we can build market awareness of our company and
our products, and the performance and utility of products and services.

     Forward-looking  statements  are  subject to risks and  uncertainties  that
could cause actual  results to differ  materially  from those  projected.  These
risks and  uncertainties  include,  but are not  limited to loss of or lower net
revenue to  customers in a highly  concentrated  customer  base,  our ability to
execute our business  plan,  our ability to raise  funding  within the first six
months of 2003, the extent to which the current economic environment affects our
current  and  potential  customers'  demand  for our  products,  the  effects of
competition,  competitive pricing and alternative  technological  advances,  the
extent to which our current and future products compete with the products of our
customers,  our ability to implement  successfully  and achieve the goals of our
corporate  restructuring  plan,  our ability to design,  market and  manufacture
successfully  products that address  market  demands,  our ability to accurately
predict our manufacturing  requirements,  our ability to maintain  relationships
with  vendors of  emerging  technologies,  changes in our  business  plans,  our
ability to retain highly skilled engineers,  and the risks set forth below under
Item 2, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Other Factors That May Affect  Results." These  forward-looking
statements  speak  only  as of  the  date  hereof.  We  expressly  disclaim  any
obligation or  undertaking  to release  publicly any updates or revisions to any
forward-looking  statements  contained  herein  to  reflect  any  change  in our
expectations  with  regard  thereto  or any  change  in  events,  conditions  or
circumstances on which any such statement is based.

     In this report, all references to "VINA" "we," "us," "our" or the "Company"
mean VINA Technologies, Inc. and its subsidiaries, except where it is made clear
that the term means only the parent company.

     This Form 10-K  includes the  following  registered  trademarks  as well as
filed  applications  to  register  trademarks  of VINA  Technologies  including:
Integrator-300, VINA, VINA Technologies, Multiservice Broadband Xchange, MX-500,
MX-550,  MX-600, and Multiservice  Xchange. All other trademarks and trade names
appearing in this Form 10-K are the property of their  respective  holders;  for
example, SLC, ConnectReach and AnyMedia are trademarks and trade names of Lucent
Technologies. The inclusion of other companies' brand names and products in this
Form 10-K is not an endorsement of VINA.

Overview

     VINA Technologies,  Inc. is a leading developer of multi-service  broadband
access communications equipment that enables communications service providers to
deliver  bundled  voice  and  data  services.  Our  products  integrate  various
broadband access  technologies,  including  existing  circuit-based and emerging
packet-based networks,  onto a single platform to alleviate capacity constraints
in communications networks.

     From our  inception  in June 1996  through  February  1997,  our  operating
activities  related  primarily to  developing  and testing  prototype  products,
commencing  the staffing of our sales and  customer  service  organizations  and
establishing   relationships   with  our   customers.   We  began  shipping  our
Multi-service  Integrator-300  product  family in March 1997,  our  Multiservice
Xchange  product in May 1999,  our eLink  product in  November  2000 and our MBX

                                       3
<PAGE>

product in September 2001. Since inception, we have incurred significant losses,
and as of December 31, 2002 we had an accumulated deficit of $177.6 million.

     We market and sell our  products and  services  directly to  communications
service providers and through OEM customers and value-added resellers,  or VARs.
Our customer base is highly concentrated. A relatively small number of customers
have  accounted for a significant  portion of our  historical  net revenue.  Our
three largest  customers  accounted for  approximately 71% of our net revenue in
fiscal year ended  December 31,  2002.  While the level of sales to any specific
customer is  anticipated  to vary from period to period,  we expect that we will
continue to experience  significant  customer  concentration for the foreseeable
future. To date,  international  sales have not been significant and we have not
been exposed to significant fluctuations in foreign currency exchange rates.

Industry Background

     Increasing Demand for Broadband Access

     The volume of Internet  and other data  traffic has grown  quickly over the
past  several  years,  due  primarily  to  increased  numbers  of users  and the
proliferation of bandwidth intensive  applications such as  business-to-business
electronic commerce, web hosting and remote access for telecommuters. Electronic
business  applications  have become  critical  business  tools and, as a result,
businesses of all sizes increasingly  require their  telecommunications  service
provider to deliver constant broadband connections at affordable rates.

     The First Mile Bottleneck

     Although service providers have deployed emerging packet-based technologies
to  expand  the speed and  capacity  of long  distance  networks,  more  limited
investment  has been made in local  networks,  or the first mile, to address the
substantial  increase  in  traffic.  As a result,  the first mile has become the
telecommunication infrastructure's principal bottleneck, limiting the ability of
service providers to deliver broadband services to the market.

     Difficulty of Profitably Connecting Customers to Metro Access Networks

     In the past,  carriers have lacked the  technological  means to concentrate
voice and data in the same platform.  Instead, they purchased separate pieces of
equipment  for each,  resulting in an  increased  burden that  multiplied  their
hardware costs and  consumption of precious  space in  co-locations  and central
office facilities.  Further aggravating the companies' capital  expenditures was
the longstanding  need to invest  extensively in specialized  telecommunications
devices such as digital loop carriers,  digital access cross-connect systems and
Frame Relay switches.  To regain control over expenses,  service  providers have
focused on limiting  the  concentration  of their voice and data to a relatively
few large locations such as central offices and thus minimizing  their number of
purchases  devices.  But the decision to locate the  equipment in sites that lie
far from customer  premises  compounded the carriers'  requirements for backhaul
transport and all its associated costs.

     Increasing Competition expands the need for Broadband Access

     Historically,   in  the  United  States,   dominant  telephone   companies,
principally Regional Bell Operating  Companies,  were the exclusive operators of
first mile  communications  networks.  The U.S.  Telecommunications  Act of 1996
opened the local  communications  market to new entrants.  The 1996 Act required
the dominant local  carriers,  known as incumbent  local exchange  carriers,  or
ILECs,  to lease  portions of their networks to other carriers to compete in the
first mile.  This Act introduced new entrants  referred to as competitive  local
exchange carriers, or CLECs. Expanded competition has accelerated the deployment
of new technologies,  including  digital  subscriber line, or DSL, digital cable
and broadband fixed wireless,  into the local market.  To date,  these broadband
solutions have been introduced as parallel data networks,  co-existing alongside
the voice infrastructure controlled by ILECs, complicating the network.

     While  both  CLECs and ILECs  have  introduced  services  in the  market to
address  competition  and the  need for  broadband  access,  each of them  faces
significant challenges in their respective markets.

     CLECs.  CLECs have targeted the Small Medium  business market in particular
and have  gained  market  share  from  ILECs in recent  years.  Most  CLECs have
provided either voice,  or data services and are facing  numerous  challenges as
they  attempt to achieve  profitability.  CLECs are seeking to decrease  network
expense by improving bandwidth  management and reducing customer turnover.  They
are also seeking to increase revenue per customer by introducing  bundled suites

                                       4
<PAGE>

of enhanced voice and data services, such as long distance,  local call routing,
Internet access, business-to-business electronic commerce and web hosting. CLECs
have also taken the lead in offering bundled voice and data services to small to
medium  size  businesses,  a market  which we believe  has been  dominated,  but
underserved,  by ILECs.  These  businesses  often do not have the  financial  or
technical  resources of large businesses to invest in and manage costly parallel
voice and data networks. We believe that small to medium size businesses present
an opportunity for CLECs to substantially grow their customer base.

     ILECs.  Historically,  ILECs have faced strict  regulations  limiting their
investment  returns  in the  voice  market  by  tying  those  returns  to  their
infrastructure  and other costs.  ILECs now seek to introduce  new enhanced data
services in  deregulated  markets  where their  returns are not so  constrained.
Although  ILECs have  traditionally  dominated the first mile market,  they have
lost  substantial  market share to CLECs in the large  business  market and have
begun to lose market share in the small to medium size business  market  because
CLECs have been able to deliver more cost-effective services. In order to defend
their  customer  base in the small to medium  size  business  market,  ILECs are
seeking to provide  bundled  voice and data,  and more  recently  long  distance
services  to  their  customers.  ILECs  are  also  experiencing  a  copper  wire
telecommunication  lines shortage in major  metropolitan areas because there has
been an increase in the number of phone lines installed in customer premises for
a variety of  applications.  Due to this  shortage,  ILECs face pressure to more
efficiently  utilize their copper wires to meet the increasing  demand for voice
and high-speed data access.

     Convergence of Voice and Data Networks

     Voice and data networks  have evolved into  parallel  networks as broadband
access  networks  include both  circuit-based  networks  utilizing time division
multiplexing, or TDM, and packet-based networks utilizing various protocols such
as  asynchronous  transfer  mode, or ATM,  internet  protocol,  or IP, and frame
relay.  The  deployment  of equipment  dedicated to  circuit-based  networks and
packet-based  networks  has  resulted  in  the  creation  of  a  highly  complex
telecommunications  infrastructure  comprised of multiple networks  dedicated to
support various  protocols.  As a result,  service providers are subject to high
network operating costs due to the redundancy of operating parallel networks and
limited  equipment  compatibility.  In order for  service  providers  to deliver
cost-effective,  bundled  voice and data  services,  we believe  these  parallel
networks need to be integrated and simplified.

     Limitations  Constraining  the  Deployment  of  Converged   Next-Generation
Network Solutions

     While  many  service  providers  desire to provide  bundled  voice and data
services,  they have been limited in their ability to deliver their  services by
the following:

     o    Uncertain  migration path. Service providers have invested billions of
          dollars in circuit-based  networks. They recognize that separate voice
          and data networks must be converged  because separate networks are not
          cost-effective  in the long term.  Service  providers require products
          that support both networks and offer a  cost-effective  migration path
          from circuit-based networks to emerging packet-based networks.

     o    Multiple Equipment and Protocol Types.  Addressing  multiple protocols
          has historically  required  service  providers to tap multiple vendors
          and  equipment  types,  and  has  resulted  in  confusion  as  well as
          unnecessary network complexity and expense.  Service providers require
          multiservice  access  solutions  that  integrate  readily  into  their
          existing  networks,  maintain  compatibility  with other components of
          their  network  and  provide  remote,  dynamic  bandwidth  and service
          provisioning,  eliminating the need for expensive manual  provisioning
          and installation.

     o    Inefficient use of network bandwidth. The rapid increase in demand for
          bandwidth  and the  limited  capacity  available  in the first mile of
          telecommunications  networks  have  strained  the  level  of  services
          provided  to end  users.  Service  providers  require  more  efficient
          multiservice access solutions that minimize network expense,  maximize
          bandwidth and are deliverable over a single copper line.

     o    Operational  challenges to  infrastructure  deployment.  The scope and
          complexity of existing  communication  networks pose unique challenges
          to  service   providers  in  recruiting  and  training  the  necessary
          personnel  to deploy,  scale,  provision  and  maintain  the  network.
          Simplified  network  solutions are needed to help reduce the number of
          personnel and technical expertise required.

                                       5
<PAGE>

     In order to address  these  challenges,  several  communications  equipment
companies have introduced  broadband  integrated access devices,  or IADs. First
generation  IADs are  circuit-based.  As service  providers plan their converged
next-generation  networks,  they have become increasingly reluctant to invest in
communication  equipment that cannot support  Internet  protocol or asynchronous
transfer mode traffic. In response, several vendors have introduced packet-based
IADs.  However,  we believe  these new  products  have not been  widely  adopted
because   service   providers  have  invested   billions  of  dollars  in  their
circuit-based  networks,  which they are unwilling to abandon. The transition to
converged,  next-generation  networks is a costly and complex  process that will
take many years to complete.  Therefore, service providers are seeking broadband
access  solutions that operate in both circuit- and  packet-based  environments,
enabling them to protect their investment in existing equipment while ensuring a
cost-effective migration path to converged, packet-based networks. This solution
must be affordable, scalable and easy to install and operate.

The VINA Solution

     We develop  and  market  broadband  access  communications  equipment  that
offers,  in one  product,  access to circuit-  and  packet-based  networks.  Our
products enable service providers to offer a complete suite of bundled voice and
data services to end users,  including customer premise,  voice, video, data and
Internet  services,  such as  business-to-business  electronic  commerce and web
hosting.  Using our products,  service  providers  may remotely and  dynamically
customize the services they deliver to individual  customers.  Furthermore,  our
customer premise products allow service  providers to  cost-effectively  deliver
bundled  offerings from a single vendor with a single bill. Our customer premise
products require little or no information technology expertise on the end users'
part and allow  service  providers to deliver  products for the first mile which
reduce  the  cost and  complexity  associated  with  purchasing,  operating  and
maintaining their networks.

     We  believe  that  our  products  offer  service  providers  the  following
benefits:

     o    Reduced Network  Complexity and Operating  Costs.  Our  platform-based
          solution  integrates  multiple products,  such as routers,  firewalls,
          channel  banks,  modems and features of private branch  exchanges,  or
          PBXs,   which  reduce  the  operating  costs  and  the  complexity  of
          delivering bundled voice and data services. Service providers are able
          to  operate  more   responsively   and  to  roll  out  services  on  a
          cost-effective  basis through our software-based  remote bandwidth and
          service provisioning.

     o    Ease of Deployment. Our hardware products incorporate a software-based
          management system,  including a graphical user interface to facilitate
          installation  and use and to allow our service  provider  customers to
          remotely  manage their product  offerings  and  upgrades.  Our product
          solution,  combined with our extensive service program, simplifies and
          accelerates the deployment of bundled voice and data services.

     o    Robust Service Platform. Our products provide telecommunications grade
          quality and  reliability.  We offer  robust  solutions  that have been
          designed  to  navigate  the  unpredictable  course of  technology  and
          standards development.  We design our products to allow software-based
          upgrades for anticipated future network transport technologies.

     o    Increased Value-Added Services.  Our solution allows service providers
          to enhance  revenue  derived  from their  installed  customer  base by
          selling additional  software-enabled  services,  such as a firewall or
          local call routing.  Our  platform-based  solution is designed to work
          with a broad range of first mile transport technologies.

     Our customer premise  solutions accept multiple  transport  services into a
single broadband access product.  By incorporating  various  functions,  such as
firewall,  channel bank and features of a private branch  exchange onto a single
platform,  we enable our service  provider  customers to reduce their  equipment
costs and network  complexity,  ease  migration  from  circuit- to  packet-based
networks, and enhance revenue opportunity from their installed customer base.

Our Products

     We offer a family of products for the first mile designed to allow carriers
to  cost-effectively  and quickly  deliver  bundled voice and data services over
broadband   connections  in  the  local  loop  and  in  metro  access  networks.
Consequently,   the  multiservice  broadband  access  products  not  only  lower
deployment  costs and  streamline  provisioning,  but also  enable  our  service
providers  to  differentiate  themselves  in the market and  address  end users'
service requirements.

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     Integrator-300

     Our  Integrator-300  is a hardware  platform  solution that allows  service
providers  to  integrate  their  customers'  voice,  data,  video  and  Internet
requirements   onto  a  single  T1   connection.   In   addition,   it  supports
software-based  value-added  features including  intelligent local call routing,
firewalls, service level agreement statistics and Business OfficeXchange,  which
enables our products to operate as stand-alone PBX systems.

     Multiservice Xchange product family

     Our  Multiservice  Xchange product family  includes the MX-500,  MX-550 and
MX-600.  The  MX-500  and  MX-550 are  compact,  multiservice  broadband  access
platforms that deliver circuit- and packet-based voice, data, video and Internet
access  services.  The MX-500 and MX-550 provide  support for the circuit- based
TDM network to deliver voice and data access services.  The MX-550 also supports
telecommunication protocols used in major international markets. The MX-600 is a
flexible  access platform that  integrates TDM voice,  data,  video and Internet
access services.

     eLink product family

     Our  eLink  product  family  of  integrated  access  devices  includes  the
eLink-208, -216 and -224 and the eRouter. VINA's eLink family converges parallel
voice,  data,  video and  Internet  transmissions  over TDM and Frame Relay on a
single  T1  connection.  Each of the  eLink-208,  -216  and -224  comes  with an
Ethernet  port  for  data  and  form a  complete  solution  in one  space-saving
footprint  by  marrying a channel  bank,  IP router,  DHCP  server,  CSU/DSU and
firewall with Network Address Translation.

     Multiservice Broadband Xchange

     Designed for installation in sites such as central offices or co-locations,
the Multiservice  Broadband Xchange, or MBX, is a multiservice platform designed
to allow providers to deploy bundled voice and data services over T1 connections
in metro access networks.

     The MBX  platform  is  designed  to  consolidate  the  voice  concentration
functionality  of a digital loop  carrier,  the data  aggregation  and switching
capabilities  of a  multiservice  ATM switch,  and the  voice/data  interworking
functions of a media  gateway.  The MBX provides  flexibility  in its support of
traditional  concentration  of voice lines with the added support of frame relay
switching.

Sales and Marketing

     Sales

     We sell our products to service providers directly through our sales force,
and indirectly  through our original equipment  manufacturer,  or OEM, customers
and value added resellers,  or VARs. We have established OEM customers and other
marketing  relationships  in order to serve  particular  markets and provide our
service  provider  customers  with  opportunities  to purchase  our  products in
conjunction with complementary products and services.

     o    Direct. Direct sales have represented, and we believe will continue to
          represent,   the  majority  of  our  sales.  We  believe  that  direct
          interaction with service providers offers us the best understanding of
          the  business  models and  technical  requirements  of our  customers.
          Further,   we   believe   that   the   competitive   nature   of   the
          telecommunications  equipment  industry requires us to reduce costs by
          eliminating intermediate steps in the distribution chain.

     o    OEM.  OEM  sales,  in  particular   with  Lucent,   are  an  important
          distribution  channel for us in the United States. We believe Lucent's
          relationships  with  CLECs,  ILECs  and  small  independent  operating
          companies  will  continue  to enhance  our ability to reach this large
          customer  base.   Lucent  uses  our  products  to  deliver   complete,
          end-to-end  solutions that are installed and  field-serviced  by their
          technical  support  organizations.  We plan to  initiate  and  develop
          relationships with additional leaders in the communications  equipment
          industry as potential OEM customers.

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<PAGE>

     o    Value-Added  Resellers.  In  addition  to  direct  sales  and  our OEM
          customers,  we have  existing  relationships  with VARs focused on the
          service  provider  market.  We intend to  leverage  our  existing  VAR
          relationships  to seek new  opportunities  for the  deployment  of our
          products.  In addition to the VARs we work with in the United  States,
          we are developing relationships with VARs in Europe, Latin America and
          South America.

     Whether we ship our products directly or through our OEM customers or VARs,
maintaining a direct relationship with each of our service provider customers is
an important  part of our sales  strategy.  Since  establishing a strong working
relationship  with our customers is critical to sales success and future product
development, we strive to maintain strong visibility across our service provider
customer base,  regardless of the distribution channel. As of December 31, 2002,
our sales organization consisted of 24 employees.

     Marketing

     Our marketing  objectives  include building market awareness and acceptance
of our company and our products, as well as generating qualified customer leads.
To  accomplish  these  objectives,   our  marketing  activities  include  public
relations,  communications,  research,  sales support,  direct marketing,  a web
presence, product marketing, as well as channel marketing. We work directly with
service  providers to help them develop  business  models and introduce  product
packages,  promotional programs and pricing strategies,  all designed to promote
the delivery of multiple voice and data services over a single  broadband access
facility.  In addition, we work with a number of industry and trade publications
and industry  analysts to educate  service  providers on how to deploy,  and the
benefits of,  multiservice  broadband access networks.  As of December 31, 2002,
our marketing organization consisted of 8 employees.

Customer Service and Support

     Our customer service  organization  maintains and supports products sold to
service providers and offers technical support to our OEM customers and VARs. We
also assist our OEM customer and VARs in offering installation,  maintenance and
support  services to their customers for our products.  We handle  questions and
problems over the  Internet,  telephone and e-mail.  We  continually  update our
website to enable  our direct and  indirect  customers  to  download  the latest
technical  information  and tips,  along with  firmware,  software  and  product
manuals.

Customers

     We  primarily  sell to CLECs,  ILECs and  independent  operating  companies
through direct sales and indirectly through our OEM customers and VARs.

     For the year ended December 31, 2002, sales to our three largest  customers
accounted for approximately 71% of our net revenue, of which sales to Allegiance
Telecom, Lucent Technologies,  and Nuvox Communications,  accounted for 37%, 18%
and 16% of our net revenue, respectively.

     For the year ended December 31, 2001,  sales to Lucent accounted for 44% of
our net revenue.  Five customers,  including Lucent Technologies,  accounted for
approximately  88% of our net revenue for the year ended  December 31, 2001,  of
which sales to Lucent and Nuvox Communications  accounted for 44% and 21% of our
net revenue, respectively.

     For the year ended December 31, 2000,  sales to Lucent accounted for 31% of
our net revenue. Five customers,  including Lucent,  accounted for approximately
75% of our net revenue for the year ended  December 31, 2000,  of which sales to
Lucent and Nuvox  Communications  accounted  for 31% and 28% of our net revenue,
respectively.

Strategic Relationships

     A  key  element  of  our  plan  is  to  expand  our  sales,  marketing  and
distribution channels through strategic relationships.  We have established, and
will  continue to pursue,  these  strategic  relationships  in order to grow net
revenues, and to provide indirect sales and marketing of our solutions.

     Lucent  Technologies.  In May 1998, we entered into an OEM  agreement  with
Lucent,  which we renewed  most  recently  in August  2002 to include  the eLink
product line.  The Lucent  agreement  expires in May 2003.  The agreement may be
terminated by Lucent at any time upon 60 days notice.  Our working  relationship

                                       8
<PAGE>

with Lucent offers each of us a number of strategic advantages.  Lucent uses our
products to offer a complete  end-to-end solution for the first mile integrating
voice and data traffic.  In turn, we have the  opportunity to leverage  Lucent's
extensive  sales force and  marketing  relationships  to reach new customers and
markets.

     This agreement  allows Lucent to purchase our products which they use under
its ConnectReach product family. ConnectReach consists of our Integrator-300 and
a seamless  connection  to  Lucent's  SLC-2000  Access  System,  a digital  loop
carrier, enabling the two products to function as a single, integrated voice and
data access system.  ConnectReach  also  interconnects  with the AnyMedia Access
System, a next-generation digital loop carrier.

Technology

     Our  products  and  technology  enable  multiservice  access  over a single
broadband  network  with an open  architecture.  The open nature of our products
allows  our  solution  to  be  seamlessly   integrated  into  the  existing  TDM
infrastructure  to deliver  enhanced bundled services while offering the ability
to migrate the network through hardware or software upgrades, to an asynchronous
transfer mode, or ATM network,  and subsequently to an Internet protocol,  or IP
network. We have developed extensive core competencies.

     Time Division Multiplexing Expertise

     Most  carrier  networks  use  high  bit  rate  digital  systems   employing
time-division  multiplexing,  or TDM. With  extensive  deployment of T1, digital
local offices and optical  transmission,  TDM became  economically viable in the
1980s and  1990s.  The  existing  telephone  network is  predominantly  based on
digital time division switching, transmission and signaling over the out-of-band
control network.

     Frame Relay and Asynchronous Transfer Mode Expertise

     We have developed  expertise in packetized voice and data  technology.  The
two widely deployed and proven packet-based technologies that can be utilized to
integrate  voice  and data  over a  single  line are ATM and  frame  relay.  Our
expertise with  packet-based  technology  stems from developing  advanced system
functions such as digital signal  processing,  echo  cancellation,  dynamic call
setup and  virtual  circuit  switching,  as well as class of service  management
capabilities.

     Internet and Internet Protocol Expertise

     Demand  for  Internet  services  has grown  exponentially.  These  services
require  an all IP  infrastructure,  especially  in the access  network  for Web
applications  and use,  e-commerce  and email.  Our products  incorporate  an IP
router  which  offers  firewall  options that  include  circuit  level  security
technology and packet filtering, as well as network address translation, or NAT,
and a software-based  dynamic host control protocol, or DHCP, to provide dynamic
IP address  management.  These IP elements are necessary to ensure  reliable and
secure  Internet  access.  Our products  offer our customers a fully  integrated
Internet access solution.

Research and Development

     We believe  that our  success  is, to a large  extent,  dependent  upon our
responsiveness  to the  continued  technological  migration  of  our  customers'
networks.  Our research and development  group works closely with our customers,
our  customer  steering  committee,  and our  marketing  department  for product
definition and to assure compatibility with central office equipment.

     Research and development expenses, including stock-based compensation,  all
product development, system testing and documentation,  were approximately $20.6
million in 2000,  $23.3  million in 2001 and $15.1  million in 2002.  All of our
product  development  costs have been  expensed as  incurred.  We have  licensed
certain  commercially  available  software  from third  parties.  We conduct the
majority of our research and development in Newark,  California and Nashua,  New
Hampshire.  As of December 31, 2002,  we had 46 full-time  employees in research
and development.

     The  majority  of our  research  and  development  efforts  are  focused on
standard products.  We have significant  hardware and software expertise in both
TDM  and IP  network  technologies.  We  place  heavy  emphasis  on  our  design
verification   processes,   which  include  extensive  testing  at  our  Newark,
California facilities and significant interoperability testing at partner sites.

                                       9
<PAGE>

Manufacturing

     We  outsource  our  manufacturing   operations  to  Benchmark  Electronics.
Benchmark  is  located  in  Angleton,   Texas.   We  believe   outsourcing   our
manufacturing  enables us to benefit from the component purchasing  capabilities
of a global contract manufacturer that can accommodate  significant increases in
production volume and product mix, as necessary.

     Benchmark  performs board assembly,  systems  configuration and testing and
product  shipping.  We have  developed  comprehensive  inspection  tests and use
statistical  process  controls  to assure  the  reliability  and  quality of our
products. Our manufacturing engineers develop all test procedures and design and
build all  equipment and stations  required to test our  products.  We integrate
these manufacturing tests with our contract manufacturer's build processes.  Our
manufacturing  personnel  work closely  with our design  engineers to design for
manufacturability,  and to  ensure  that  our test  methods  remain  current  as
broadband access technologies evolve.

     We obtain several of the key components used in our products from single or
limited  sources of  supply.  We have  encountered,  and expect in the future to
encounter,  difficulty in obtaining  these  components  from our suppliers.  The
suppliers  of our  components  range  from small  vendors  to large  established
companies.  Components  for which we  currently  have  limited  sources  include
digital signal processors,  subscriber line interface circuits mirco processors,
DSL modules and flash memory.  We purchase most  components on a purchase  order
basis  and do not  have  guaranteed  supply  arrangements  with  most of our key
suppliers.  We, or our contract manufacturer may not be able to obtain necessary
supplies in a timely manner.

     We  select   manufacturers  and  suppliers  on  the  basis  of  technology,
manufacturing capacity,  materials management,  quality and cost. We may, in the
future,  seek  additional  manufacturers  and suppliers to meet our  anticipated
requirements  and  lower the cost of our  products.  We  obtained  International
Standards Organization, or ISO, 9001 certification in 2000.

Competition

     The  market  for  multiservice   broadband  access  products  is  extremely
competitive.  We believe that  competition  will increase  substantially  as the
introduction of new technologies,  deployment of broadband access networks,  and
potential  regulatory  changes  create new  opportunities  for  established  and
emerging  companies.  Furthermore,  DSL- and  T1-based  solutions  compete  with
broadband wireless and cable offers. We face competition primarily in two areas:
equipment  manufacturers,  such as Adtran, Carrier Access Corporation,  Verilink
and Zhone  Technologies and diversified  equipment  manufacturers  such as Cisco
Systems, Lucent, Siemens, and Alcatel.

     The  principal  competitive  factors for  products  utilized in our markets
include:

     o    pricing;
     o    product features;
     o    reliability and scalability;
     o    performance;
     o    compatibility with other products;
     o    ease of installation and use;
     o    customer relationships, service and support; and
     o    brand recognition.

     Some of our competitors have greater  financial and other resources than do
we. With greater resources, our competitors may be able to take better advantage
of new competitive  opportunities,  including offering lease and other financing
programs. In addition, the rapid technological  developments in our industry can
result in frequent  changes to our group of  competitors.  Consolidation  in our
industry may also affect our ability to compete. Acquisitions may strengthen our
competitors'  financial,  technical and marketing  resources and provide greater
access to customers or new technologies.  As a result,  these competitors may be
able to devote greater resources than we can to the development, promotion, sale
and support of their products.



                                       10
<PAGE>


Intellectual Property

     We rely on a combination of copyright,  patent, trademark, trade secret and
other intellectual property laws,  nondisclosure agreements and other protective
measures  to  protect  our  proprietary   rights.  We  also  utilize  unpatented
proprietary know-how and trade secrets and employ various methods to protect our
trade secrets and know-how.  We currently have four patent applications pending,
and another patent  application in process,  but no issued patents.  Although we
employ a variety of intellectual  property in the development and  manufacturing
of  our  products,  we  believe  that  none  of  our  intellectual  property  is
individually critical to our current operations.  However,  taken as a whole, we
believe our  intellectual  property  rights are significant and that the loss of
all or a substantial portion of such rights could have a material adverse effect
on our results of operations.  Our intellectual property protection measures may
be insufficient  to prevent  misappropriation  of our  technology.  From time to
time,  third  parties  may  assert  patent,   copyright,   trademark  and  other
intellectual  property  rights to  technologies,  processes  or rights  that are
important to our business.  These assertions may result in litigation  requiring
us to pay substantial damages or to redesign or stop selling our products. Also,
even if we were to prevail, litigation could be time-consuming and expensive and
could  divert our time and  attention.  In  addition,  the laws of many  foreign
countries do not protect our  intellectual  properties to the same extent as the
laws of the United  States.  We may desire or be  required to renew or to obtain
licenses from others in order to further develop and market  commercially viable
products effectively.  Any necessary licenses may not be available on reasonable
terms.

Employees

     As of December 31, 2002, we employed 98 full-time employees including 32 in
sales and marketing, 9 in operations, 46 in research and development,  and 11 in
finance   and   administration.   Our   employees   are  not   covered   by  any
collective-bargaining  agreements,  and  we  consider  our  relations  with  our
employees to be good.

Item 2. Properties

     Our headquarters are in Newark,  California,  where we lease  approximately
26,000  square  feet of  space.  We also  operate  a  facility  in  Nashua,  New
Hampshire.   We  currently   have   sublease  and  lease   agreements   covering
approximately  35,000 square feet that expire on various dates ranging from June
2003 to July 2007.  We believe  that our  current  facilities  are  adequate  to
support our current and anticipated near-term operations and believe that we can
obtain  additional  space we may need in the future on  commercially  reasonable
terms.

Item 3. Legal Proceedings

     From time to time,  we may be  involved  in  litigation  relating to claims
arising out of the ordinary  course of business.  As of the date of this report,
there are no material legal proceedings pending or, to our knowledge, threatened
against us.

Item 4. Submission of Matters to a Vote of Security Holders

     We did not have any matters  submitted to a vote of security holders during
the fourth quarter ended December 31, 2002.


                                       11
<PAGE>


Executive Officers

     Set forth below is information concerning our executive officers who report
under Section 16 of the Securities  Exchange Act of 1934, as amended,  and their
ages as of March 6, 2003:

<TABLE>
<CAPTION>


      Name                  Age                           Position(s)
---------------------      ----        ----------------------------------------------------------------------
<S>                         <C>        <C>
W. Michael West             52         Chairman of the Board and Chief Executive Officer
Stanley E. Kazmierczak      42         Vice President, Finance and Administration, Chief Financial Officer and
                                       Secretary
Darrell R. Furlong          45         Vice President, Engineering
C. Reid Thomas              41         Executive Vice President, Sales and Product Marketing

</TABLE>

     W. Michael West has served as our Chief Executive Officer since April 2002.
Mr. West has served as our Chairman of the Board of  Directors  since June 1999.
He served as Executive  Vice  President for Lucent  Technologies  from September
1997 to January 1998.  Mr. West was  President,  Chief  Operating  Officer and a
director of Octel  Communications from January 1995 to August 1997, after having
served as Executive Vice President from September 1986 to January 1995. Mr. West
held multiple  positions with Rolm Corporation from 1979 to September 1986, most
recently as General Manager of the National Sales  Division.  Mr. West currently
serves as a director of Media Arts Group, Inc.

     Stanley  E.  Kazmierczak  has  served as our Vice  President,  Finance  and
Administration,  Chief  Financial  Officer and  Secretary  since July 1999.  Mr.
Kazmierczak  served as Chief Financial  Officer and Vice President,  Finance and
Operations of Digital Link, a supplier of networking products, from January 1999
to July 1999, and as Chief Financial Officer from December 1992 to July 1999. He
was Vice President,  Finance and  Administration of Digital Link from March 1996
to January 1999.

     Darrell R.  Furlong  has served as our Vice  President,  Engineering  since
September   2001.  Mr.  Furlong  was  Senior  Vice  President  of  Research  and
Development and Chief  Technology  Officer for METRObility  Optical Systems from
October 1997 to September  2001.  Mr. Furlong served as a Director of the router
division of Bay Networks/Wellfleet  (acquired by Nortel Networks) from June 1992
to October 1997. He also directed all hardware development activities at Concord
Communications from May 1986 to June 1992.

     C. Reid  Thomas  has  served as our  Executive  Vice  President,  Sales and
Product  Marketing  since July 2001.  Mr. Thomas  served as our Vice  President,
Sales from April 2000 until July 2001. He served as Managing Director, Sales for
Lucent Technologies,  where he was responsible for AT&T Markets from August 1996
to April  2000.  Prior to his  employment  with  Lucent,  Mr.  Thomas  was Group
Manager,  Strategy and Alliances for Octel Communications,  from January 1995 to
August 1996.

                                       12
<PAGE>



                                     PART II

Item 5. Market Registrant's Common Equity and Related Stockholder Matters

     Since our initial  public  offering  until  September 19, 2002,  our common
stock traded on the Nasdaq National Market  ("Nasdaq")  under the symbol "VINA."
On September  20, 2002,  the listing of our common  stock was  transferred  from
Nasdaq to the Nasdaq  SmallCap  Market where our stock  continues to trade under
the symbol "VINA." The following  table sets forth,  for the periods  indicated,
the high and low  sales  prices  per  share of our  common  stock on  Nasdaq  as
reported in its consolidated transaction reporting system.

                                     2001                2002
                                     ----                ----
                                High       Low       High       Low
                                ----       ---       ----       ---
First Quarter................$   6.00  $   1.25   $   1.40  $   0.71
Second Quarter...............    2.34      1.00       0.75      0.21
Third Quarter................    1.85      0.52       0.29      0.01
Fourth Quarter...............    2.05      0.54       0.43      0.12

     The last  reported  sale price of our common  stock on the Nasdaq  SmallCap
Market  was  $0.14 per share on March 6,  2003.  As of March 6, 2003 our  common
stock was held by approximately 416 stockholders of record.

     We have never declared or paid any cash dividends on our capital stock, and
we do not currently  intend to pay any cash dividends on our common stock in the
foreseeable  future.  We expect to retain future  earnings,  if any, to fund the
development  and growth of our business.  Our board of directors  will determine
future dividends, if any.




                                       13
<PAGE>
Item 6. Selected Consolidated Financial Data

     The following  selected  consolidated  financial data has been derived from
the  audited  consolidated  financial  statements.  When you read this  selected
consolidated financial data, it is important that you also read the consolidated
financial  statements  and related notes  included in this Form 10-K, as well as
the section of this Form 10-K entitled "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations." Our historical  results are not
necessarily indicative of our future results.
<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                 ---------------------------------------------------------
                                                    1998         1999        2000        2001       2002
                                                 ----------  ----------- -----------  ----------- --------
                                                            (in thousands, except per share data)
Consolidated Statements of Operations Data:
<S>                                                <C>         <C>         <C>         <C>         <C>
Net revenue ...................................... $  4,393    $ 12,700    $ 32,078    $ 45,112    $ 25,143
Cost of revenue (excluding stock-based
   compensation) .................................    2,054       7,713      19,240      28,714      17,534
                                                   --------    --------    --------    --------    --------
Gross profit (excluding stock-based
   compensation) .................................    2,339       4,987      12,838      16,398       7,609
Costs and expenses:
  Research and development (excluding
   stock-based compensation) .....................    4,174       6,690      12,609      18,841      13,931
  Selling, general and administrative
   (excluding stock-based compensation) ..........    6,414      10,881      21,124      22,697      14,515
   Stock-based compensation, net (*) .............      154       4,715      24,169      10,570       1,276
   In-process research and development ...........       --          --          --       5,081          --
   Amortization of intangible assets .............       --          --          --       8,243         789
   Impairment of goodwill and intangible
     assets ......................................       --          --          --          --      29,783
   Restructuring expenses (excluding stock-
    based compensation) ..........................       --          --          --         991       2,941
                                                   --------    --------    --------    --------    --------
       Total costs and expenses ..................   10,742      22,286      57,902      66,423      63,235
                                                   --------    --------    --------    --------    --------
Loss from operations .............................   (8,403)    (17,299)    (45,064)    (50,025)    (55,626)
Other income, net ................................      413         223       1,732       1,383         196
                                                   --------    --------    --------    --------    --------
Net loss ......................................... $ (7,990)   $(17,076)   $(43,332)   $(48,642)  $ (55,430)
                                                   ========    ========    ========    ========    ========

Net loss per share, basic and diluted(1) ......... $  (2.63)   $  (3.30)   $  (2.63)   $  (1.31)   $  (0.90)
                                                   ========    ========    ========    ========    ========

Shares used in computation, basic and ............    3,038       5,169      16,467      37,121      61,643
   diluted(1)                                      ========    ========    ========    ========    ========

(*) Stock-based compensation, net:

Cost of revenue .................................. $      2    $    152    $  1,855    $  1,016    $    520
Research and development .........................       78       1,098       7,985       4,446       1,135
Selling, general and administrative ..............       74       3,465      14,329       7,677       1,930
Restructuring benefit ............................       --          --          --      (2,569)     (2,309)
                                                   --------    --------    --------    --------    --------
Total ............................................ $    154    $  4,715    $ 24,169    $ 10,570    $  1,276
                                                   ========    ========    ========    ========    ========


                                                                      December 31,
                                                 ---------------------------------------------------------
                                                    1998         1999        2000        2001       2002
                                                 ----------  ----------- -----------  ----------- --------
Consolidated Balance Sheet Data:                                      (in thousands)
Cash, cash equivalents and short-term
investments ...................................... $ 11,359    $  2,568    $ 44,499    $ 16,305    $  4,617
Restricted cash ..................................       --          --          --          --       3,500
Working capital (deficit) ........................   11,058        (492)     40,657      27,812       7,978
Total assets .....................................   14,456       6,673      58,536      78,964      20,580
Short-term debt ..................................       --          --          --          --       3,000
Long-term debt, less current portion .............      655         534          --          --          --
Total stockholders' equity .......................   11,549         348      44,829      65,528      11,372

</TABLE>


                                       14
<PAGE>
--------------
(1)  The diluted net loss per share  computation  excludes  potential  shares of
     common stock issuable  pursuant to convertible  preferred stock and options
     to purchase  common  stock,  as well as common stock  subject to repurchase
     rights held by us, as their effect would be  antidilutive.  See Notes 2 and
     10 of notes to consolidated financial statements for a detailed explanation
     of the  determination of the shares used in computing basic and diluted net
     loss per share.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     This  section  and  other  parts  of this  report  contain  forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially  from  those  anticipated  in  forward  looking  statements  for many
reasons,  including but not limited to the risks  discussed in this report under
the heading  "Other Factors That May Affect  Results." The following  discussion
and analysis should be read in conjunction with "Selected Consolidated Financial
Data" and the  Consolidated  Financial  Statements  and related  notes  included
elsewhere in this Annual Report on Form 10-K.

     Recent Developments

As of December 31, 2002, we had a  certificate  of deposit for $3.0 million that
secured a $3.0 million  committed  revolving line of credit. In January 2003, we
remitted full payment for the $3.0 million revolving line of credit.

During January 2003 we announced and completed a restructuring  plan intended to
better align our operations with the changing market  conditions.  This plan was
designed to focus on profit contribution and reduce expenses. This restructuring
includes a workforce reduction and other operating reorganization.

On February 17, 2003,  we granted  2,601,982  option grants as part of the Stock
Option Exchange  Program  approved by the Board of Directors in May 2002.  Under
this  program,  eligible  employees  were able to make an  election  to exchange
certain  outstanding  stock option grants with an exercise price greater than or
equal to $1.00 for a new option to  purchase  the same  number of shares of VINA
Technologies Inc. common stock. The replacement option was issued per the Option
Exchange Program at least six months and one day after the cancellation  date of
August 15, 2002. The new options were issued from our 2000 Stock Option Plan and
are non-statutory stock options.  The individuals  participating in this program
were employees of VINA  Technologies,  Inc. on the replacement grant date making
them  eligible  to  receive  the new stock  options.  No  consideration  for the
canceled stock options was provided to individuals  terminating employment prior
to the  replacement  grant date.  The new option has an exercise price of $0.16,
which is equal to VINA  Technologies  Inc.  common stock's  closing price on the
date prior to the replacement grant. The new stock options will continue to vest
on the same schedule as the canceled options.

In February  2003,  we reached a settlement  agreement to terminate the lease on
our Maryland facility. Prior to this settlement agreement, we had estimated that
we would pay the remaining portion of the lease through termination. As a result
of the  settlement,  we have  lowered our  estimate by  approximately  $318,000.
Therefore,  we have  decreased  net loss for 2002 by  approximately  $318,000 as
compared  to the press  release  dated  January  28,  2003.  The effects of this
settlement  agreement  have been  reflected in the financial  statements of this
Annual Report on Form 10-K.

In February 2003, we established an asset secured credit line with a bank for up
to $3.5  million.  We need to meet  monthly  financial  covenants  to be able to
borrow against this credit line and can meet them currently. The credit line has
a one-year  duration  and has terms of prime rate plus 2%. We  currently  do not
have any outstanding balance on this credit line.

Overview

VINA Technologies,  Inc. is a leading developer of multiservice broadband access
communications  equipment  that  enables  communications  service  providers  to
deliver  bundled  voice  and  data  services.  Our  products  integrate  various
broadband access  technologies,  including  existing  circuit-based and emerging
packet-based networks,  onto a single platform to alleviate capacity constraints
in communications networks.

                                       15
<PAGE>

     From our  inception  in June 1996  through  February  1997,  our  operating
activities  related  primarily to  developing  and testing  prototype  products,
commencing  the staffing of our sales and  customer  service  organizations  and
establishing   relationships   with  our   customers.   We  began  shipping  our
Multiservice  Integrator-300  product  family in March  1997,  our  Multiservice
Xchange  product in May 1999, our eLink product family in November 2000, and our
MBX product in September 2001.  Since  inception,  we have incurred  significant
losses,  and as of December 31, 2002,  we had an  accumulated  deficit of $177.6
million.

     We market and sell our  products and  services  directly to  communications
service providers and through OEM customers and value-added resellers,  or VARs.
We recognize revenue when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, the price is fixed and determinable
and collectibility is reasonably assured.  Product revenue is generated from the
sale of communications equipment embedded with software that is essential to its
functionality,  and accordingly, we account for these transactions in accordance
with SEC  Staff  Accounting  Bulletin  (SAB) No.  101,  Revenue  Recognition  in
Financial  Statements,  and Statement of Position (SOP) 97-2,  Software  Revenue
Recognition.  Product  revenue is  recognized  when all SAB No. 101 and SOP 97-2
criteria are met which  generally  occurs at the time of  shipment.  In multiple
element  arrangements  where  there  are  undelivered  elements  at the  time of
shipment,  product revenue is recognized at the time of shipment as the residual
value of the  arrangement  after  allocation  of fair  value to the  undelivered
elements based on vendor specific objective evidence (VSOE).  Service revenue is
generated  from the sale of  installation,  training and  postcontract  customer
support  (PCS)  agreements  related  to the  communications  equipment.  We also
account for these  transactions in accordance with SAB No. 101 and SOP 97-2, and
as such recognizes revenue when all of the related revenue recognition  criteria
are met  which is:  (i) at the time the  installation  or  training  service  is
delivered;  and (ii)  ratably  over the term of the PCS  agreement.  In multiple
element   arrangements   where  these   services   are   undelivered   when  the
communications   equipment  is  shipped,  we  defer  the  fair  value  of  these
undelivered  elements based on VSOE and  recognizes  revenue as the services are
delivered.  We  additionally  record a provision for estimated sales returns and
warranty costs at the time the product revenue is recognized.

     Our customer  base is highly  concentrated.  A  relatively  small number of
customers  have  accounted  for a  significant  portion  of our  historical  net
revenue.  For the year  ended  December  31,  2002,  sales to our three  largest
customers  accounted for approximately 71% of our net revenue, of which sales to
Allegiance Telecom, Lucent Technologies, and Nuvox Communications, accounted for
37%, 18% and 16% of our net revenue,  respectively.  While the level of sales to
any specific  customer is anticipated  to vary from period to period,  we expect
that we will continue to experience  significant customer  concentration for the
foreseeable future. Any decrease in sales or reduces pricing or products sold to
these   customers  will   substantially   reduce  our  net  revenue.   To  date,
international  sales have not been  significant.  International  sales have been
denominated primarily in U.S. dollars and, accordingly, we have not been exposed
to significant fluctuations in foreign currency exchange rates.

     Cost of revenue consists  primarily of costs of products  manufactured by a
third-party contract manufacturer, component costs, depreciation of property and
equipment,  personnel  related  costs to manage the  contract  manufacturer  and
warranty costs,  and excludes  amortization of deferred stock  compensation.  We
conduct program  management,  manufacturing  engineering,  quality assurance and
documentation  control at our facility in Newark,  California.  We outsource our
manufacturing and testing requirements to Benchmark Electronics.  Accordingly, a
significant portion of our cost of revenue consists of payments to this contract
manufacturer.

     We  expect  our gross  margin to be  affected  by many  factors,  including
competitive pricing pressures,  fluctuations in manufacturing volumes, inventory
obsolescence,  costs of components and  sub-assemblies,  costs from our contract
manufacturers   and  the  mix  of  products  or  system   configurations   sold.
Additionally,  our gross  margin  may  fluctuate  due to  changes  in our mix of
distribution channels. Currently, we derive a significant portion of our revenue
from sales made to our OEM customers. A significant increase in revenue to these
OEM customers would adversely affect our gross margin percentage.

     Research and  development  expenses  consist  primarily  of  personnel  and
related costs,  depreciation expenses and prototype costs related to the design,
development,  testing and enhancement of our products,  and exclude amortization
of deferred stock  compensation.  We expense all of our research and development
expenses as incurred.

     Selling, general and administrative expenses consist primarily of personnel
and related costs,  including  salaries and commissions for personnel engaged in
direct and indirect selling and marketing and other administrative functions and
professional costs and exclude amortization of deferred stock compensation.


                                       16
<PAGE>

     Stock-based  compensation  consists  of the fair  value  of  stock  options
granted to  non-employees  for services and the  amortization  of deferred stock
compensation on stock options granted to employees.  Deferred stock compensation
represents  the  difference  between the deemed fair market  value of our common
stock at the time of the grant of the  option and the  exercise  prices of these
options.  We are amortizing  deferred stock compensation using a multiple option
award  valuation  approach over the vesting  periods of the applicable  options,
which is generally four years. The amortization of deferred stock  compensation,
based upon options granted  through  December 31, 2002, was $1.3 million in 2002
and is expected to be $283,000 in 2003, $23,000 in 2004 and $9,000 thereafter.

     Other income,  net, consists primarily of interest earned on our cash, cash
equivalent  and  short-term  investment  balances  partially  offset by interest
expense associated with our debt obligations.

     From  inception  through  December  31,  2002,  we incurred  net losses for
federal and state  income tax purposes  and have not  recognized  any income tax
provision or benefit.  As of December 31, 2002,  we had $98.0 million of federal
and $36.0  million of state net operating  loss carry  forwards to offset future
taxable  income  that  expire  in  varying   amounts   through  2022  and  2014,
respectively.  Given our limited  operating history and losses incurred to date,
coupled  with  difficulty  in  forecasting  future  results,  a  full  valuation
allowance  has been  provided  against  deferred tax assets.  Furthermore,  as a
result of changes in our equity ownership from our preferred stock offerings and
initial public offering, utilization of net operating losses and tax credits may
be  subject  to  substantial  annual  limitations  due to the  ownership  change
limitations  as defined by Section 382 of the Internal  Revenue Code and similar
state  provisions.  The annual  limitation  may result in the  expiration of net
operating losses and tax credits before utilization.

Critical Accounting Policies

     Our  discussion  and  analysis of our  financial  condition  and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles. We believe
the  following  critical  accounting  policies,  among  others,  affect the more
significant  judgments and estimates  used in the  preparation  of our financial
statements:

     Revenue  Recognition - We recognize revenue when persuasive  evidence of an
arrangement  exists,  delivery has occurred or services have been rendered,  the
price is fixed  and  determinable  and  collectibility  is  reasonably  assured.
Product revenue is generated from the sale of communications  equipment embedded
with  software  that is  essential to its  functionality,  and  accordingly,  we
account for these transactions in accordance with SEC Staff Accounting  Bulletin
(SAB) No. 101,  Revenue  Recognition in Financial  Statements,  and Statement of
Position (SOP) 97-2, Software Revenue Recognition.

     Product  revenue is  recognized  when all SAB No. 101 and SOP 97-2 criteria
are met, which  generally  occurs at the time of shipment.  In multiple  element
arrangements  where  there are  undelivered  elements  at the time of  shipment,
product  revenue is recognized at the time of shipment as the residual  value of
the arrangement after allocation of fair value to the undelivered elements based
on vendor specific objective evidence (VSOE).

     Service  revenue is generated from the sale of  installation,  training and
post contract  customer support (PCS) agreements  related to the  communications
equipment. We also account for these transactions in accordance with SAB No. 101
and SOP 97-2,  and as such  recognize  revenue  when all of the related  revenue
recognition  criteria  are met  which  is (i) at the time  the  installation  or
training  service  is  delivered;  and  (ii)  ratably  over  the term of the PCS
Agreement  respectively.  In multiple element  arrangements where these services
are undelivered when the communications  equipment is shipped, we defer the fair
value of these  undelivered  elements based on VSOE and recognize revenue as the
services are delivered.  We also record a provision for estimated  sales returns
and warranty costs at the time the product revenue is recognized.

     Allowance for Doubtful Accounts - We continuously  monitor  collections and
payments from our customers and maintain a provision for estimated credit losses
based upon the age of outstanding  invoices and any specific customer collection
issues that we have identified.  Since our accounts  receivable are concentrated
in a relatively few number of customers,  a significant  change in the financial
position of any one of these customers  could have a material  adverse impact on
the  collectability  of  our  accounts  receivable,  which  would  require  that
additional allowances be recorded.

     Inventory  Reserves - We regularly review the volume and composition of our
inventory on hand and compare it to our estimated forecast of product demand and
production  requirements.  We record write downs for estimated  obsolescence  or

                                       17
<PAGE>

unmarketable  inventory  for the  difference  between the cost and the estimated
market  value  based  upon  these  reviews.  If actual  future  demand or market
conditions are less favorable than our estimates,  then  additional  write-downs
may be required.

     Restructuring  Accrual - The current  accounting  for  restructuring  costs
requires us to record provisions and charges when we have a formal and committed
plan. In connection  with these plans, we have recorded  estimated  expenses for
severance and  outplacement  costs,  lease  cancellations,  asset write-offs and
other  restructuring  costs.  Given the  significance  of, and the timing of the
execution of such  activities,  this  process is complex and  involves  periodic
reassessments of estimates made at the time the original decisions were made. We
continually  evaluate  the  adequacy  of the  remaining  liabilities  under  our
restructuring  initiatives.  Although we believe that these estimates accurately
reflect the costs of our restructuring plans, actual results may differ, thereby
requiring  us to record  additional  provisions  or  reverse  a portion  of such
provisions.

     Valuation  and   Impairment  of  Goodwill  and  Other   Acquisition-Related
Intangible  Assets  -  We  operate  in  one  reportable  segment,   the  design,
development, marketing and sale of multi-service broadband access communications
equipment,  and have only one reporting unit, VINA consolidated,  therefore, our
measurement  of the fair value for  goodwill  is our market  capitalization.  We
evaluate   the  fair  value  of  our  company  as   determined   by  its  market
capitalization  against  its  carrying  value,  net  assets,  to evaluate if any
impairment has occurred in the balance of the goodwill and intangible assets.

     Stock-based  compensation  - The Company  accounts for employee stock plans
under the  intrinsic  value method  prescribed by  Accounting  Principles  Board
Opinion ("APB") No. 25, Accounting for Stock Issued to Employees,  and Financial
Accounting Standards Board Interpretation ("FIN") No. 44, Accounting for Certain
Transactions  Involving Stock Compensation (an Interpretation of APB No. 25) and
has adopted the  disclosure-only  provisions  of SFAS No.  123,  Accounting  for
Stock-Based  Compensation.  The Company  accounts for  stock-based  compensation
relating to equity instruments  issued to non-employees  based on the fair value
of options or warrants  estimated using the  Black-Scholes  model on the date of
grant in compliance  with the Emerging  Issues Task Force No. 96-18,  Accounting
for Equity Instruments that are issued to Other than Employees for Acquiring, or
in Conjunction with Selling,  Goods or Services.  Compensation expense resulting
from  non-employee  options is amortized  using the multiple  option approach in
compliance with FIN No. 28, Accounting for Stock  Appreciation  Rights and Other
Variable Stock Option or Award Plans.

Results of Operations

     The  following  table  sets  forth  selected  consolidated   statements  of
operations  data as a percentage of net revenue for the periods  indicated.  For
purposes of this table, cost of revenue, gross profit, research and development,
and selling,  general and administrative  amounts and restructuring  expenses do
not include stock-based compensation.

                                                    Years Ended December 31,
                                                    ------------------------
                                                    2000      2001      2002
                                                    ----      ----      ----

Net revenue ...................................     100.0%    100.0%    100.0%
Cost of revenue (excluding stock-based
   compensation) ..............................      60.0      63.7      69.7
                                                    -----     -----     -----
Gross profit (excluding stock-based
   compensation) ..............................      40.0      36.3      30.3
                                                    -----     -----     -----
Costs and expenses:
   Research and development (excluding stock-
      based compensation) .....................      39.3      41.7      55.4
   Selling, general and administrative
      (excluding stock-based compensation) ....      65.9      50.3      57.7
   Stock-based compensation, net (*) ..........      75.3      23.4       5.1
   In-process research and development ........        --      11.3        --
   Amortization of intangible assets ..........        --      18.3       3.1
   Impairment of goodwill and intangible assets        --        --     118.5
   Restructuring expenses (excluding stock-
       based compensation) ....................        --       2.2      11.7
                                                    -----     -----     -----
Total costs and expenses ......................     180.5     147.2     251.5
                                                    -----     -----     -----

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<PAGE>

Loss from operations ..........................    (140.5)   (110.9)   (221.2)
                                                    -----     -----     -----
Other income, net .............................       5.4       3.1       0.7
                                                    -----     -----     -----
Net loss ......................................    (135.1)%  (107.8)%  (220.5)%
                                                    =====     =====     =====

     (*) Stock-based compensation, net:
     Cost of revenue...........................       5.8%      2.3%      2.1%
     Research and development..................      24.9%      9.8%      4.5%
     Selling, general and administrative.......      44.6%     17.0%      7.7%
     Restructuring expenses....................        --      (5.7%)    (9.2%)
                                                   ------    -------  -------
     Total.....................................      75.3%     23.4%      5.1%
                                                  =======   =======   =======

Fiscal Years Ended December 31, 2002, 2001 and 2000

Net  revenue.  Net  revenue  decreased  44% to $25.1  million in 2002 from $45.1
million in 2001.  This  decrease in net revenue was  primarily  due to decreased
unit  sales to  existing  customers  and  lower  average  selling  prices on our
Integrator-300  and eLink products..  Net revenue increased 41% to $45.1 million
in 2001 from $32.1  million in 2000.  This increase in net revenue was primarily
due to increased unit sales of  Integrator-300's  and eLink products to existing
customers.  For the year ended December 31, 2001,  sales to Lucent accounted for
44% of our net revenue. Five customers, including Lucent Technologies, accounted
for  approximately  88% of our net revenue for the year ended December 31, 2001,
of which sales to Lucent and Nuvox  Communications  accounted for 44% and 21% of
our net revenue, respectively.

     For the year ended December 31, 2002, sales to our three largest  customers
accounted for approximately 71% of our net revenue, of which sales to Allegiance
Telecom, Lucent Technologies and Nuvox Communications accounted for 37%, 18% and
16% of our net revenue,  respectively.  We believe that we have been the primary
supplier of integrated access devices to Allegiance in the past.  Allegiance has
advised  us  that it is now  pursuing  a two  vendor  strategy  in this  product
category,  which will reduce our  opportunity  for sales to Allegiance in future
periods and will create additional  competitive pricing pressures.  As a result,
we do not expect to receive any significant revenue from Allegiance in the first
quarter of 2003 as Allegiance begins  purchasing from the second vendor,  and we
expect our net revenue from  Allegiance in 2003 to decrease  significantly  from
2002 levels.  Our  concentrated  customer  base  continues to expose us to risks
resulting  from  potential  adverse  changes  in these  relationships  and risks
resulting from the financial condition of these customers.

Cost of revenue.  Cost of revenue including  stock-based  compensation was $18.1
million in 2002,  $29.7 million in 2001, and $21.1 million in 2000. Gross profit
including stock-based  compensation decreased to $7.1 million in 2002 from $15.4
million in 2001. Gross profit including  stock-based  compensation  increased to
$15.4  million  in 2001 from  $11.0  million  in 2000.  Gross  margin  including
stock-based  compensation  decreased  to 28% in  2002  from  34% in  2001.  This
decrease  in gross  margin  was a result  of lower  revenue  that  caused  fixed
overhead  costs to be a higher  percentage  of cost in 2002 as well as decreased
average selling prices on our  Integrator-300  and eLink products.  Gross margin
including  stock-based  compensation  remained  flat  at 34% in  2001  and  2000
primarily due to a reduction in stock-based compensation to $1.0 million in 2001
compared  to $1.9  million in 2000  offset by a $1.8  million  charge for excess
inventory  purchase  commitment  incurred  in the  first  quarter  of 2001.  The
provision for the excess inventory purchase commitments was primarily the result
of a  shift  in one of our  customer's  demands  from  next  generation  network
equipment to traditional Time Division Multiplex,  or TDM network equipment.  We
anticipate  that our gross margin may continue to fluctuate due to many factors,
including competitive pricing pressures,  fluctuations in manufacturing volumes,
costs from our contract manufacturers and the mix of products sold.

     Research  and  development  expenses.  Research  and  development  expenses
including stock-based compensation decreased to $15.1 million in 2002 from $23.3
million in 2001. These decreases were primarily a result of decreased  personnel
costs, and to a lesser extent stock-based  compensation and prototype  expenses.
Research and development expenses including stock-based  compensation  increased
to $23.3  million  in 2001 from  $20.6  million in 2000.  These  increases  were
primarily a result of additional  personnel costs, higher prototype expenses and
higher consulting costs associated with our continuing  research and development
efforts.  Research and development expenses including  stock-based  compensation
have changed as a  percentage  of net revenue from 64% in 2000 to 52% in 2001 to
60% in 2002.  The decrease from 2000 to 2001 was due primarily due to a decrease
in  stock-based  compensation  expense.  The  increase  from  2001 to  2002  was
primarily due to expenses decreasing at a lesser rate than net revenue.

                                       19
<PAGE>

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses including stock based  compensation  decreased to $16.4
million  in 2002 from  $30.4  million in 2001 due to  decreases  in  stock-based
compensation,   employee  costs  and  consulting  costs.  Selling,  general  and
administrative  expenses including stock based  compensation  decreased to $30.4
million in 2001 from $35.5  million  in 2000 due to a  decrease  in  stock-based
compensation  partially  offset by an increase in other general costs.  Selling,
general and administrative expenses including stock-based compensation decreased
as a percentage of net revenue from 111% in 2000 to 67% in 2001 and 65% in 2002.
The  decrease  in 2001 was a result of net revenue  increasing  at a rate faster
than  selling,  general and  administrative  expenses.  The decrease in 2002 was
primarily a result of lower stock-based compensation expenses as a percentage of
net revenue.

     Stock-based  compensation.  Stock-based  compensation  expense decreased to
$1.3  million for 2002 from $10.6  million for 2001 and $24.2  million for 2000.
The  decrease  from  2000 to 2001 and 2002 is due to  using  the  multiple-award
approach  for  amortizing   stock-based   compensation   coupled  with  the  net
restructuring  benefit  of  $2.6  million  in  2001  and  $2.3  million  in 2002
associated  with the  reversal  of prior  period  estimated  stock  compensation
expense on previously  amortized unvested stock options.  Based on stock options
granted  through  December 31, 2002, we expect to record  amortization  of stock
compensation expense of $283,000 and $23,000 in 2003 and 2004, respectively, and
$9,000 thereafter.

     In-process research and development. On February 27, 2001, we completed the
acquisition of Woodwind  Communications  Systems,  Inc., or Woodwind. In 2001 we
recorded  a  one-time  charge  of  $5.1  million  for the  purchased  in-process
technology  related to development  projects that had not reached  technological
feasibility, had no alternative future use, and for which successful development
was uncertain.  The conclusion that the in-process  development  effort,  or any
material   sub-component,   had  no  alternative   future  use  was  reached  in
consultation with our management, and Woodwind's management.

     Impairment  of goodwill  and  intangible  assets.  As VINA  operates in one
reportable segment, the design, development, marketing and sale of multi-service
broadband access communications equipment, and has only one reporting unit, VINA
consolidated,  the  measurement of the fair value for our goodwill is our market
capitalization. The deterioration of the telecom industry and the decline in our
current  product  sales in the first quarter of 2002 required us to evaluate the
fair value of the company's goodwill. We evaluated the fair value of our company
as  determined  by our market  capitalization  against our carrying  value,  net
assets, and determined that goodwill was impaired.  In addition,  under SFAS No.
144  "Accounting  for the  Impairment  of  Disposal  of  Long-Lived  Assets"  we
evaluated our  intangible  assets for impairment and determined a portion of the
intangible  assets  were  impaired.  As a result,  we  recorded a $29.8  million
impairment  charge  in 2002.  The  amount  was  comprised  of $27.3  million  of
goodwill,  in the first  quarter  of 2002,  and $2.0  million  and  $500,000  of
intangible assets, in the first and third quarters of 2002, respectively.

     Restructuring  expenses.  Restructuring  expenses,  excluding the impact of
stock-based  compensation,  were $2.9  million and  $991,000 for the years ended
December  31,  2002  and  2001,  respectively.  These  resulted  primarily  from
severance, disposition of excess capital equipment and abandonment of facilities
costs associated with the workforce reduction plans in the third quarter of 2001
and the second and third  quarters of 2002.  Including the impact of stock-based
compensation,  we recorded a net  restructuring  expense of  $632,000  and a net
restructuring  benefit of $1.6 million for the years ended December 31, 2002 and
2001, respectively.

     Other income, net. Interest and other income, net, decreased to $196,000 in
2002 from $1.4 million in 2001.  This  decrease was  primarily  attributable  to
lower cash balances resulting in lower interest income earned offset by interest
expense on bank loans incurred in 2002. Interest and other income, net decreased
to $1.4 million,  in 2001 from $1.7 million in 2000. This decrease was primarily
due to lower cash balances resulting in lower interest earned.

Liquidity and Capital Resources

     Cash and cash equivalents at December 31, 2002 were $4.6 million,  compared
to $15.8  million at  December  31,  2001.  The  decrease  of $11.2  million was
attributable to cash provided by financing  activities of $9.7 million offset by
cash  used by  investing  activities  of  $698,000  and cash  used in  operating
activities  of  $20.3  million.   Cash  provided  by  financing  activities  was
attributable  to net  proceeds  from  the sale of  common  stock.  Cash  used by
investing  activities  was primarily  attributable  to purchases of property and
equipment. Cash used in operating activities consisted primarily of the net loss
of $55.4 million,  a decrease in accounts payable of $4.8 million, a decrease in
other  liabilities of $2.4 million,  partially offset by a $2.4 million decrease
in  inventory,  a $4.7  million  decrease  in  accounts  receivable,  as well as

                                       20
<PAGE>

non-cash  charges of $4.7  million  for  depreciation  and  amortization,  $29.8
million for impairment of goodwill and intangible  assets,  and $1.3 million for
stock-based compensation.

     Our contract  manufacturer has obtained or has on order substantial amounts
of inventory to meet our revenue  forecasts.  If future shipments do not utilize
the committed inventory,  the contract manufacturer has the right to bill us for
any excess component and finished goods inventory. We also have a non-cancelable
purchase order with a major chip supplier for one of our critical components. As
of December 31, 2002,  the estimated  purchase  commitments  and  non-cancelable
purchase orders to those  companies was $1.6 million.  In August 2002, we placed
$1.0 million on deposit with our contract manufacturer as security against these
purchase commitments.

     As of December 31, 2002, we had  $3,500,000 in restricted  cash.  This cash
was comprised of two separate  restricted  cash items.  We had a certificate  of
deposit for $3.0 million, this amount is not available to fund operations, as it
secured a $3.0 million committed revolving line of credit that had been utilized
at December 31, 2002. We also have an  irrevocable  letter of credit of $500,000
that is used as collateral for the lease on the Newark, California facility.

     We  currently  have lease  commitments  of $1.8  million  for leases on two
properties,  which expire by July 30, 2007. Future annual  obligations under our
operating leases are as follows: $259,000 in 2003; $337,000 in 2004; $430,000 in
2005; $491,000 in 2006; $292,000 in 2007.

     In February  2003, we  established an asset secured credit line with a bank
for up to $3.5 million.  We need to meet monthly  covenants to be able to borrow
against  this  credit  line and can meet them  currently.  The credit line has a
one-year  duration  and  terms of prime  plus 2%. We  currently  do not have any
outstanding balance on this credit line.

     We will need to obtain  additional  funding  during the first six months of
2003.  We will from time to time  review  and may  pursue  additional  financing
opportunities,  including  sales of  additional  equity or debt  securities,  or
utilizing  our credit line.  The sale of additional  equity or other  securities
could  result in  additional  dilution  to our  stockholders.  Arrangements  for
additional  financing may not be available in amounts or on terms  acceptable to
us, if at all.  Further,  our recent transfer from the Nasdaq National Market to
the  Nasdaq  SmallCap  Market  may make it even more  difficult  for us to raise
funds. The factors described above indicate that we may be unable to continue as
a going concern for the foreseeable future.

New Accounting Standards

     In June 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS
No. 141,  Business  Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets.  SFAS No. 141 requires that all business  combinations  initiated  after
June 30, 2001 be  accounted  for under the  purchase  method and  addresses  the
initial  recognition  and  measurement of goodwill and other  intangible  assets
acquired  in  a  business  combination.  SFAS  No.  142  addresses  the  initial
recognition and measurement of intangible  assets acquired outside of a business
combination  and  the  accounting  for  goodwill  and  other  intangible  assets
subsequent to their  acquisition.  SFAS No. 142 provides that intangible  assets
with finite useful lives be amortized and that  goodwill and  intangible  assets
with  indefinite  lives  will  not be  amortized,  but will be  tested  at least
annually for  impairment.  We adopted SFAS No. 142 for our fiscal year beginning
January 1, 2002.  Upon adoption of SFAS No. 142, we stopped the  amortization of
intangible assets with indefinite lives (goodwill, which includes the reclass of
workforce-in-place and tradenames) with a net carrying value of $27.6 million at
December 31, 2001 and annual  amortization  of $8.8 million that  resulted  from
business  combinations  initiated  prior to the  adoption of SFAS No.  141.  The
deterioration  of the telecom  industry and the decline of our product  sales in
2002 were  factors  that  required us to evaluate  goodwill,  determine it to be
impaired, and record a $27.3 million impairment charge during 2002.

     In August 2001, the FASB issued SFAS No. 144,  Accounting for Impairment or
Disposal of Long-Lived Assets.  SFAS No. 144 supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and addresses  financial  accounting  and  reporting  for the  impairment or
disposal of long-lived assets.  This statement is effective for us on January 1,
2002. The  deterioration  of the telecom industry and the decline of our product
sales in 2002 were factors that required us to evaluate  intangibles,  determine
them to be impaired, and record a $2.5 million impairment charge during 2002.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal activities" ("SFAS 146"). SFAS No. 146 addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies EITF 94-3 "Liability  Recognition for Certain Employee Termination
Benefits and other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)".  SFAS  No.  146  requires  that  a  liability  for a cost

                                       21
<PAGE>

associated with an exit or disposal activity to be recognized when the liability
is incurred.  Under EITF 94-3, a liability for an exit cost as generally defined
in EITF 94-3 was recognized at the date of the commitment to an exit plan.  SFAS
No. 146  states  that a  commitment  to a plan,  by  itself,  does not create an
obligation  that meets the  definition of a liability.  Therefore,  SFAS No. 146
eliminates the definition and requirements for recognition of exit costs in EITF
94-3.  It  also  establishes  that  fair  value  is the  objective  for  initial
measurement of the  liability.  SFAS No. 146 is to be applied  prospectively  to
exit or disposal activities  initiated after December 31, 2002. We do not expect
the  adoption  of SFAS No.  146 to have a  material  effect on our  consolidated
financial statements.

     In November 2002, the FASB issued FASB  Interpretation  No. 45 "Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness of Others" ("FIN 45"). FIN 45 requires the guarantor
to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation  undertaken in issuing the guarantee.  It also  elaborates on the
disclosures  to be made by a guarantor  in its  financial  statements  about its
obligations under certain guarantees that it has issued and to be made in regard
of product warranties. Disclosures required under FIN 45 are already included in
these  financial  statements,  however,  the  initial  recognition  and  initial
measurement  provisions of this FIN are  applicable  on a  prospective  basis to
guarantees  issued or modified  after  December 31,  2002.  We do not expect the
adoption  of FIN 45 to have a  material  effect  on our  consolidated  financial
statements.

     In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-Based
Compensation--Transition  and  Disclosure.  This Statement  amends SFAS No. 123,
Accounting  for  Stock-Based  Compensation,  to provide  alternative  methods of
transition  to SFAS No. 123's fair value method of  accounting  for  stock-based
employee  compensation.  This Statement also amends the disclosure  provision of
SFAS No. 123 and APB No. 28, Interim Financial Reporting,  to require disclosure
in the summary of significant  accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee  compensation on reported
net income and earnings per share in annual and interim financial statements. We
have elected to continue accounting for employee stock option plans according to
APB No.  25,  and we  adopted  the  disclosure  requirements  under SFAS No. 148
commencing on December 31, 2002.

                         FACTORS THAT MAY AFFECT RESULTS

     The risks and  uncertainties  described  below are not the only ones facing
our company.  Additional  risks and  uncertainties  not presently known to us or
that we currently deem  immaterial may also impair our business  operations.  If
any of the following risks actually occur, our business, financial condition and
results of operations could be materially and adversely affected.

Risks Related To Our Business

We will need to obtain  additional  funding during the first six months of 2003.
If we are  unable to raise more  capital,  we may not have  sufficient  funds to
continue operations at the current level, if at all.

     During  the  year  ended  December  31,  2002,  we used  cash in  operating
activities  of $20.3  million.  As of December  31,  2002,  we had cash and cash
equivalents of $4.6 million and an  accumulated  deficit of $177.6  million.  We
will need to obtain  additional  funding during the first six months of 2003. If
additional  funds are raised  through  the  issuance of equity  securities,  the
percentage of equity ownership of our existing  stockholders will be reduced. In
addition,  holders of these equity  securities  may have rights,  preferences or
privileges  senior to those of the holders of our common  stock.  If  additional
funds  are  raised  through  the  issuance  of  debt  securities,  we may  incur
significant   interest   charges,   and  these  securities  would  have  rights,
preferences and privileges senior to holders of common stock. The terms of these
securities  could  also  impose  restrictions  on  our  operations.   Additional
financing may not be available  when needed on terms  favorable to us or at all.
Our recent move from the Nasdaq  National  Market to the Nasdaq  SmallCap Market
may make it even more difficult for us to raise funds. If we are unable to raise
additional capital, we will not have sufficient funds to continue operations.

We  rely on a small  number  of  telecommunications  customers  for  substantial
portions of our net revenue.  If we lose one of our  customers  or  experience a
delay or  cancellation  of a  significant  order or a  decrease  in the level of
purchases  from any of our  customers,  our net  revenue  would  decline and our
operating results and business would be harmed.

     We derive almost all of our net revenue from direct sales to a small number
of   telecommunications   customers  and  our  indirect   sales  through  Lucent
Technologies,  one of our original  equipment  manufacturers,  or OEM, customers

                                       22
<PAGE>
that sell and market our products. If we lose one of our customers or experience
a delay or  cancellation  of a  significant  order or a decrease in the level of
purchases  from any of our  customers,  our net  revenue  would  decline and our
operating results and business would be harmed.  For the year ended December 31,
2002, sales to our three largest  customers  accounted for  approximately 71% of
our net revenue, of which sales to Allegiance  Telecom,  Lucent Technologies and
Nuvox  Communications  accounted  for  37%,  18%  and  16% of our  net  revenue,
respectively.  We believe that we have been the primary  supplier of  integrated
access  devices to Allegiance in the past.  Allegiance has advised us that it is
now pursuing a two vendor strategy in this product  category,  which will reduce
our  opportunity  for sales to  Allegiance  in future  periods  and will  create
additional  competitive  pricing  pressures.  As a result,  we do not  expect to
receive any significant  revenue from Allegiance in the first quarter of 2003 as
Allegiance  begins  purchasing  from the  second  vendor,  and we expect our net
revenue from Allegiance in 2003 to decrease  significantly from 2002 levels. Our
concentrated  customer  base  continues  to  expose us to risks  resulting  from
potential  adverse changes in these  relationships  and risks resulting from the
financial condition of these customers.

We expect that the  telecommunications  industry  will  continue  to  experience
consolidation.  If any of our  customers is acquired by a company that is one of
our  competitors'  customers,  we may  lose its  business.  Also,  the  ultimate
business success of our direct service provider customers, our OEM customers and
value added  resellers,  or VARs,  and our indirect  customers  who purchase our
products  through  an OEM  customer  and VARs,  could  affect the demand for our
products.  For example,  Advanced Telecom Group,  one of our largest  customers,
declared  bankruptcy in May 2002,  and we are no longer  shipping any product to
them. In addition,  any difficulty in collecting amounts due from one or more of
our key customers would harm our operating results and financial  condition.  If
any of these  events  occur,  our net revenue  would  decline and our  operating
results and business would be harmed.

The difficulties experienced by many of our current and potential CLEC customers
have had and may continue to have an adverse effect on our business.

     To date,  we have sold the  majority of our products to  competitive  local
exchange  carrier,  or CLEC,  customers,  either  directly  or  through  our OEM
customers.  CLECs have experienced  extreme  difficulties in obtaining financing
for their  businesses.  As a result,  CLECs have been forced to scale back their
operations  or  terminate  their  operations.  For example,  our CLEC  customer,
Advanced Telecom Group,  recently filed for bankruptcy  protection.  In light of
the financial and economic difficulties facing our customers, we expect to see a
continued  decline in orders  from many of our major  customers  as they  reduce
growth and spending and diversify their suppliers of critical  components and as
we  experience  increased  pricing  pressure on our  products.  If our customers
become  unable to pay for shipped  products,  we may be  required  to  write-off
significant  amounts of our accounts  receivable.  Similarly,  if our  customers
order products and then suspend or cancel the orders prior to shipping,  we will
not generate  revenues from the products we build.  In such  circumstances,  our
inventories may increase and our expenses will increase.  Further,  we may incur
substantially  higher  inventory  carrying costs and excess inventory that could
become  obsolete  over time.  We expect that our  business  will  continue to be
significantly  and  negatively  affected  unless and until there is  substantial
improvement in the ability of CLECs to finance their businesses.


Because we have a limited  operating  history  and  operate in a new and rapidly
evolving  telecommunications  market,  you may  have  difficulty  assessing  our
business and predicting our future financial results.

     We were  incorporated  in June 1996 and did not begin shipping our products
until March 1997.  Due to our limited  operating  history,  it is  difficult  or
impossible for us to predict our future results of operations.

We have a history of losses, we expect future losses,  and we may not be able to
generate   sufficient   net   revenue  in  the  future  to  achieve  or  sustain
profitability.

     We have incurred significant losses since inception and expect that our net
losses and negative cash flow from  operations will continue for the foreseeable
future.  We incurred net losses of  approximately  $17.1 million in 1999,  $43.3
million in 2000, $48.6 million in 2001 and $55.4 million in 2002. As of December
31, 2002, we had an accumulated  deficit of  approximately  $177.6  million.  To
achieve  profitability,  we will need to generate and sustain higher net revenue
while lowering our cost and expense levels.

We have a limited order  backlog.  If we do not obtain  substantial  orders in a
quarter, we may not meet our net revenue objectives for that quarter.

     Since inception, our order backlog at the beginning of each quarter has not
been  significant,  and we expect  this trend to  continue  for the  foreseeable
future.  Accordingly,  we must obtain substantial additional orders in a quarter
for shipments in that quarter to achieve our net revenue  objectives.  Our sales
agreements allow  purchasers to delay scheduled  delivery dates without penalty.

                                       23
<PAGE>

Our customer  purchase  orders also allow  purchasers  to cancel  orders  within
negotiated time frames without significant penalty. In addition,  due in part to
factors such as the timing of product release dates, purchase orders and product
availability,  significant volume shipments of our products could occur near the
end of our fiscal quarters. If we fail to ship products by the end of a quarter,
our operating results would be adversely affected for that quarter.

Our products are subject to price reduction and margin pressures. If our average
selling  prices  decline  and we  fail  to  offset  that  decline  through  cost
reductions,  our gross  margins and potential  profitability  could be seriously
harmed.

     Competitive  pressures have forced us to reduce the prices of our products.
We  expect  similar  price  reductions  to occur in the  future in  response  to
competitive  pressures.  In addition, our average selling prices decline when we
negotiate   volume  price   discounts  with   customers  and  utilize   indirect
distribution  channels.  If our average  selling  prices  decline and we fail to
offset that decline  through cost  reductions,  our gross  margins and potential
profitability would be seriously harmed.

We  depend  upon a  single  contractor  for  most  of our  manufacturing  needs.
Termination of this relationship  could impose significant costs on us and could
harm or interfere with our ability to meet scheduled product deliveries.

     We do not have  internal  manufacturing  capabilities  and  have  generally
relied  primarily on a contract  manufacturer to build our products.  Currently,
our primary contract manufacturer is Benchmark Electronics.  Under our agreement
with  Benchmark,  Benchmark  may cancel the  contract on short notice and is not
obligated  to supply  products to us for any  specific  period,  in any specific
quantity or at any  specific  price,  except as may be provided in a  particular
purchase order. Our reliance on Benchmark involves a number of risks,  including
the lack of operating history between us and Benchmark,  absence of control over
our manufacturing  capacity,  the unavailability of, or interruptions in, access
to  process  technologies  and  reduced  control  over  component  availability,
delivery  schedules,  manufacturing  yields  and  costs.  If  our  agreement  or
relationship  with  Benchmark  is  terminated,   we  will  not  have  a  primary
manufacturing  contract  with  any  third  party.  We will  have to  immediately
identify and qualify one or more  acceptable  alternative  manufacturers,  which
could  result  in  substantial  manufacturing  delays  and  cause  us  to  incur
significant  costs. It is possible that an alternate source may not be available
to us when needed or be in a position to satisfy our production  requirements at
acceptable  prices and quality.  Any significant  interruption in  manufacturing
would  harm  our  ability  to  meet  our  scheduled  product  deliveries  to our
customers, harm our reputation and could cause the loss of existing or potential
customers, any of which could seriously harm our business and operating results.


Since the telecommunications  industry is characterized by large purchase orders
placed on an irregular basis, it is difficult to accurately  forecast the timing
and size of orders. Accordingly,  our net revenue and operating results may vary
significantly and unexpectedly from quarter to quarter.

     We may  receive  purchase  orders  for  significant  dollar  amounts  on an
irregular basis depending upon the timing of our customers'  network  deployment
and sales and marketing  efforts.  Because orders we receive may have short lead
times, we may not have sufficient  inventory to fulfill these orders, and we may
incur  significant  costs in attempting to expedite and fulfill these orders. In
addition,  orders  expected in one quarter could shift to another because of the
timing  of  our   customers'   purchase   decisions  and  order   reductions  or
cancellations.  For example,  under our OEM agreement with Lucent  Technologies,
Lucent has the right to delay previously placed orders for any reason.  The time
required for our customers to  incorporate  our products into their own can vary
significantly  and generally exceeds several months,  which further  complicates
our planning  processes and reduces the predictability of our operating results.
Accordingly,  our net revenue and operating  results may vary  significantly and
unexpectedly from quarter to quarter.

     Our customers have in the past built, and may in the future build,
significant inventory in order to facilitate more rapid deployment of
anticipated major projects or for other reasons. After building a significant
inventory of our products, these parties may be faced with delays in these
anticipated major projects for various reasons. For example, Lucent may be
required to maintain a significant inventory of our products for longer periods
than they originally anticipated, which would reduce future purchases. These
reductions, in turn, could cause fluctuations in our future results of
operations and severely harm our business and financial condition.

Our  failure to enhance our  existing  products  or develop  and  introduce  new
products that meet changing  customer  requirements and  technological  advances
would limit our ability to sell our products.

                                       24
<PAGE>

     Our ability to increase net revenue will depend significantly on whether we
are  able to  anticipate  or  adapt to  rapid  technological  innovation  in the
telecommunications  industry and to offer, on a timely and cost-effective basis,
products  that meet changing  customer  demands and industry  standards.  If the
standards we adopted are different from those we have chosen to support,  market
acceptance of our products may be significantly  reduced or delayed.  Developing
new or enhanced  products is a complex and uncertain process and we may not have
sufficient resources to successfully and accurately anticipate technological and
market trends, or to successfully manage long development cycles. We must manage
the transition  from our older products to new or enhanced  products to minimize
disruption in customer  ordering  patterns and ensure that adequate  supplies of
new products are available for delivery to meet anticipated customer demand. Any
significant delay or failure to release new products or product  enhancements on
a timely  and  cost-effective  basis  could  harm our  reputation  and  customer
relationships,  provide a competitor with a first-to-market opportunity or allow
a competitor to achieve greater market share.

Our products  require  substantial  investment  over a long product  development
cycle, and we may not realize any return on our investment.

     The  development  of new or enhanced  products  is a complex and  uncertain
process.  We,  and our OEM  customers,  have in the past  and may in the  future
experience  design,  manufacturing,  marketing and other difficulties that could
delay or prevent the development,  introduction or marketing of new products and
enhancements. Development costs and expenses are incurred before we generate any
net revenue from sales of products  resulting from these  efforts.  We intend to
continue to incur  substantial  research and development  expenses,  which could
have a negative impact on our earnings in future periods.

If we do not predict our manufacturing  requirements accurately,  we could incur
additional costs and suffer manufacturing delays.

     We currently provide  forecasts of our demand to our contract  manufacturer
four to six months  prior to  scheduled  delivery of products to our  customers.
Lead times for the materials and components that we order vary significantly and
depend on numerous factors, including the specific supplier,  contract terms and
demand for a component at a given time. Our contract  manufacturer  has obtained
or has on order substantial  amounts of inventory to meet our revenue forecasts.
If future  shipments  do not  utilize  the  committed  inventory,  the  contract
manufacturer  has the right to bill us for any  excess  component  and  finished
goods inventory.  We also have a non-cancelable purchase order with a major chip
supplier  for one of our  critical  components.  As of December  31,  2002,  the
estimated  purchase  commitments  and  non-cancelable  purchase  orders to those
companies is $1.6  million.  In August  2002,  we placed $1.0 million on deposit
with our contract  manufacturer as security against these purchase  commitments.
If we overestimate our  manufacturing  requirements,  demand for our products is
lower  than  forecasted,  or a product  in our  manufacturing  forecast  becomes
obsolete,  our  contract  manufacturer  may have  purchased  excess or  obsolete
inventory.  For  example,  in March 2001 we  expensed  $1.8  million  for excess
inventory  purchase  commitments  and in March 2002 we expensed $1.7 million for
excess inventory.  For those parts that are unique to our products,  we could be
required  to pay for  these  excess or  obsolete  parts  and  recognize  related
inventory  write-offs.  If  we  underestimate  our  requirements,  our  contract
manufacturer   may  have  an  inadequate   inventory,   which  could   interrupt
manufacturing  of our  products and result in delays in  shipments,  which could
negatively affect our net revenue in such periods.

If our products contain  undetected  software or hardware errors, we could incur
significant  unexpected expenses,  experience product returns and lost sales and
be subject to product liability claims.

     Our products are highly technical and designed to be deployed in very large
and complex  networks.  While our products  have been  tested,  because of their
nature,  they can only be fully tested when  deployed in networks  that generate
high amounts of voice or data traffic.  Because of our short operating  history,
some of our  products  have not yet been  broadly  deployed.  Consequently,  our
customers  may discover  errors or defects in our products  after they have been
broadly deployed. For example,  following deployment of our MBX, products it was
discovered  that the MBX failed to meet all of its  specified  applications.  We
then temporarily suspended deployment of the MBX. The MBX is now fully available
to customers for all  applications.  There can be no assurance  that  additional
defects or errors may not arise or be discovered in the future. In addition, our
customers may use our products in conjunction  with products from other vendors.
As a result,  when problems occur, it may be difficult to identify the source of
the problem.  Any defects or errors in our products discovered in the future, or
failures of our customers'  networks,  whether caused by our products or another
vendor's products,  could result in loss of customers or decrease in net revenue
and market share.

                                       25
<PAGE>

     We may be subject to significant  liability claims because our products are
used in connection with critical  communications  services.  Our agreements with
customers  typically  contain  provisions  intended  to limit  our  exposure  to
liability  claims.  However,  these  limitations  may not preclude all potential
claims  resulting from a defect in one of our products.  Liability  claims could
require  us to  spend  significant  time  and  money  in  litigation  or to  pay
significant  damages.  Any of these  claims,  whether or not  successful,  could
seriously damage our reputation and business.

Our net revenue could decline  significantly if our relationship  with our major
OEM customer deteriorates.

     A  significant  portion of our net revenue is derived  from sales to Lucent
Technologies,  one of our  OEM  customers.  Our  agreement  with  Lucent  is not
exclusive and does not contain minimum volume  commitments.  Lucent Technologies
accounted for  approximately  18% of our net revenue for the year ended December
31, 2002.  Our OEM agreement with Lucent expires in May 2003, and we can give no
assurances that we will be able to extend the term of our contract or enter into
a new contract with Lucent.  Lucent may terminate the agreement  earlier upon 60
days notice.  At any time or after a short period of notice,  Lucent could elect
to cease  marketing and selling our products.  They may so elect for a number of
reasons,  including the  acquisition by Lucent of one or more of our competitors
or their  technologies,  or because  one or more of our  competitors  introduces
superior or more cost-effective  products. In addition, we intend to develop and
market new products that may compete directly with the products of Lucent, which
may also harm our relationships with this customer. For example, our MBX product
may compete with products offered by our OEM customers,  including Lucent, which
could  adversely  affect  our  relationship  with that  customer.  Our  existing
relationship  with  Lucent  could  make it harder  for us to  establish  similar
relationships  with  Lucent's  competitors.   Any  loss,  reduction,   delay  or
cancellation in expected sales to our OEM customers, the inability to extend our
contract or enter into a new contract with Lucent on favorable  terms would hurt
our  business  and our  ability to  increase  net  revenue  and could  cause our
quarterly results to fluctuate significantly.

Telecommunications  networks  are  comprised  of multiple  hardware and software
products from multiple  vendors.  If our products are not compatible  with other
companies'  products within our customers'  networks,  orders will be delayed or
cancelled.

     Many of our  customers  require  that our products be designed to work with
their existing  networks,  each of which may have different  specifications  and
utilize  multiple   protocols  that  govern  the  way  devices  on  the  network
communicate  with each other.  Our  customers'  networks  may  contain  multiple
generations of products from different vendors that have been added over time as
their networks have grown and evolved. Our products may be required to work with
these  products as well as with future  products in order to meet our customers'
requirements. In some cases, we may be required to modify our product designs to
achieve a sale, which may result in a longer sales cycle, increased research and
development  expense,  and reduced  operating  margins.  If our products are not
compatible with existing equipment in our customers'  networks,  whether open or
proprietary, installations could be delayed, or orders for our products could be
cancelled.

If we  fail  to  win  contracts  at  the  beginning  of  our  telecommunications
customers'  deployment  cycles,  we may not be able to sell  products  to  those
customers for an extended period of time, which could inhibit our growth.

     Our existing and potential  telecommunications customers generally select a
limited number of suppliers at the beginning of a deployment cycle. As a result,
if we are not selected as one of these suppliers, we may not have an opportunity
to sell products to that customer until its next purchase cycle, which may be an
extended period of time. In addition,  if we fail to win contracts from existing
and potential  customers  that are at an early stage in their design cycle,  our
ability to sell  products  to these  customers  in the  future may be  adversely
affected  because  they may prefer to continue  purchasing  products  from their
existing  vendor.  Since we rely on a small number of customers for the majority
of our  sales,  our  failure  to  capitalize  on  limited  opportunities  to win
contracts with these customers could severely harm us.

Since the sales cycle for our products is typically long and  unpredictable,  we
have difficulty  predicting future net revenue and our net revenue and operating
results may fluctuate significantly.

     A customer's decision to purchase our products,  in particular with our MBX
product,  often involves a significant commitment of its resources and a lengthy
evaluation and product qualification  process. Our sales cycle varies from a few
months to over a year. As a result, we may incur substantial sales and marketing
expenses and expend  significant  management  effort  without any assurance of a
sale. A long sales cycle also subjects us to other risks,  including  customers'

                                       26
<PAGE>

budgetary  constraints,  internal  acceptance  reviews and order  reductions  or
cancellations. Even after deciding to purchase our products, our customers often
deploy our products slowly.

The   telecommunications   industry  is   characterized   by  rapidly   changing
technologies.  If we are unable to develop and maintain strategic  relationships
with vendors of emerging  technologies,  we may not be able to meet the changing
needs of our customers.

     Our success  will depend on our ability to develop and  maintain  strategic
relationships  with  vendors  of  emerging  technologies.  We  depend  on  these
relationships   for  access  to  information  on  technical   developments   and
specifications that we need to develop our products.  We also may not be able to
predict which existing or potential  partners will develop leading  technologies
or  industry  standards.  We may not be able to  maintain  or develop  strategic
relationships or replace strategic  partners that we lose. If we fail to develop
or maintain  strategic  relationships  with  companies  that  develop  necessary
technologies or create industry  standards,  our products could become obsolete.
We could  also be at a  competitive  disadvantage  in  attempting  to  negotiate
relationships with those potential  partners in the future. In addition,  if any
strategic partner breaches or terminates its relationship with us, we may not be
able to sustain or grow our business.

We depend on sole source and limited source suppliers for key components.  If we
are unable to buy  components on a timely basis,  we will not be able to deliver
our products to our customers on time which could cause us to lose customers. If
we purchase  excess  components  to reduce this risk,  we may incur  significant
inventory costs.

     We obtain  several of the key  components  used in our products,  including
interface  circuits,   microprocessors,   digital  signal  processors,   digital
subscriber  line  modules and flash  memory,  from single or limited  sources of
supply. We have encountered,  and expect in the future to encounter,  difficulty
in obtaining these components from our suppliers. We purchase most components on
a purchase order basis and we do not have guaranteed  supply  arrangements  with
most  of our  key  suppliers.  Financial  or  other  difficulties  faced  by our
suppliers or significant  changes in demand for these components could limit the
availability  of these  components  to us at  acceptable  prices and on a timely
basis,  if at all.  Any  interruption  or  delay in the  supply  of any of these
components,  or our inability to obtain these components from alternate  sources
at  acceptable  prices and within a reasonable  amount of time,  would limit our
ability to meet  scheduled  product  deliveries  to our customers or force us to
reengineer  our  products,  which may hurt our gross  margins and our ability to
deliver  products on a timely  basis,  if at all. A  substantial  period of time
could be  required  before  we would  begin  receiving  adequate  supplies  from
alternative  suppliers,  if  available.   In  addition,   qualifying  additional
suppliers is time  consuming and expensive and exposes us to potential  supplier
production difficulties or quality variations.

The complex nature of our telecommunications products requires us to provide our
customers with a high level of service and support by highly trained  personnel.
If we do not expand our customer service and support  organization,  we will not
be able to meet our customers' demands.

     We currently have a small customer service and support organization, and we
will need to increase  these  resources  to support any increase in the needs of
our existing and new customers. Hiring customer service and support personnel in
our industry is very  competitive due to the limited number of people  available
with the necessary technical skills and understanding of our technologies. If we
are unable to expand or maintain our customer service and support  organization,
our  customers  may  become  dissatisfied  and we could lose  customers  and our
reputation  could be harmed. A reputation for poor service would prevent us from
increasing sales to existing or new customers.

The competition for qualified  personnel has been intense in our industry and in
Northern  California.  If we are unable to attract and retain key personnel,  we
may not be able to sustain or grow our business.

     Our  success   depends  to  a   significant   degree  upon  the   continued
contributions of the principal members of our sales, marketing,  engineering and
management  personnel,  many of whom would be difficult to replace.  None of our
officers or key employees is bound by an  employment  agreement for any specific
term,  and we do not have "key person" life insurance  policies  covering any of
our employees.  The competition  for qualified  personnel has been strong in our
industry  and in Northern  California,  where there is a high  concentration  of
established and emerging growth  technology  companies.  This competition  could
make it more  difficult  to retain our key  personnel  and to recruit new highly
qualified  personnel.  Our Chief  Executive  Officer  resigned April 1, 2002. W.
Michael  West,  Chairman of the Board of  Directors,  has been  appointed  Chief
Executive Officer.  We are currently  undertaking a search for a permanent Chief
Executive Officer;  however, we do not know when, or if, we will find a suitable
candidate. In addition, our Vice President of Business Development and Marketing
Communications  and our Vice  President  of Human  Resources  both  resigned  in

                                       27
<PAGE>

January  2003.  We  currently  are not  planning  on  re-hiring  for  these  two
positions.  To attract  and retain  qualified  personnel,  we may be required to
grant large option or other stock-based  incentive  awards,  which may be highly
dilutive to existing  shareholders.  We may also be required to pay  significant
base  salaries and cash bonuses to attract and retain these  individuals.  These
payments  could harm our  operating  results.  If we are not able to attract and
retain the necessary personnel,  we could face delays in developing our products
and  implementing  our sales and marketing  plans and we may not be able to grow
our business.

We rely on a combination of patent, copyright,  trademark and trade secret laws,
as well as confidentiality  agreements and licensing arrangements,  to establish
and protect our proprietary rights. Failure to protect our intellectual property
will  limit  our  ability  to  compete  and  result  in a loss of a  competitive
advantage and decreased net revenue.

     Our success and ability to compete depend  substantially on our proprietary
technology.   Any  infringement  of  our  proprietary  rights  could  result  in
significant  litigation  costs,  and  any  failure  to  adequately  protect  our
proprietary  rights could result in our competitors  offering similar  products,
potentially  resulting in loss of a  competitive  advantage  and  decreased  net
revenue. We presently have four U.S. patent applications pending, and one patent
issued.  Despite  our  efforts  to  protect  our  proprietary  rights,  existing
copyright,  trademark and trade secret laws afford only limited  protection.  In
addition,  the laws of many  foreign  countries  do not protect our  proprietary
rights to the same extent as do the laws of the United  States.  Attempts may be
made to copy or reverse  engineer  aspects of our  products or to obtain and use
information  that we regard as proprietary.  Accordingly,  we may not be able to
protect our proprietary rights against  unauthorized third party copying or use.
Furthermore,  policing  the  unauthorized  use of  our  products  is  difficult.
Litigation may be necessary in the future to enforce our  intellectual  property
rights,  to protect our trade  secrets or to determine the validity and scope of
the proprietary  rights of others.  This litigation  could result in substantial
costs and diversion of resources and may not ultimately be successful.

We may be subject to intellectual  property  infringement claims that are costly
to defend and could limit our ability to use some technologies in the future.

     Our industry is characterized by frequent  intellectual property litigation
based on allegations of infringement of intellectual  property rights. From time
to time,  third  parties have  asserted,  and may assert in the future,  patent,
copyright,  trademark and other intellectual  property rights to technologies or
rights that are  important to our  business.  In addition,  our  agreements  may
require  that we  indemnify  our  customers  for  any  expenses  or  liabilities
resulting  from claimed  infringements  of patents,  trademarks or copyrights of
third parties.  Any claims asserting that our products  infringe or may infringe
the  proprietary  rights  of third  parties,  with or  without  merit,  could be
time-consuming,  result in costly  litigation  and  divert  the  efforts  of our
technical and management personnel. These claims could cause us to stop selling,
incorporating  or  using  our  products  that  use the  challenged  intellectual
property  and could  also  result in  product  shipment  delays or require us to
redesign  or modify our  products  or enter  into  licensing  agreements.  These
licensing agreements,  if required, could increase our product costs and may not
be available on terms acceptable to us, if at all.

If necessary  licenses of third-party  technology are not available to us or are
very   expensive,   we  may  be  unable  to  develop  new  products  or  product
enhancements.

     From time to time we may be  required  to  license  technology  from  third
parties to develop  new  products  or product  enhancements.  These  third-party
licenses may not be available to us on commercially reasonable terms, if at all.
Our inability to obtain  necessary  third-party  licenses may force us to obtain
substitute  technology of lower quality or  performance  standards or at greater
cost, any of which could seriously harm the competitiveness of our products.

The telecommunications  market is becoming increasingly global. While we plan to
expand  internationally,  we have limited experience  operating in international
markets.  In our efforts to expand  internationally,  we could become subject to
new  risks,  which  could  hamper  our  ability  to  establish  and  manage  our
international operations.

     We have limited  experience  in  marketing  and  distributing  our products
internationally  and in  developing  versions of our  products  that comply with
local standards.  In addition,  our international  operations will be subject to
other inherent risks, including:

     o    The  failure  to  adopt   regulatory   changes  that   facilitate  the
          provisioning of competitive communications services;
     o    difficulties adhering to international protocol standards;
     o    expenses associated with customizing products for other countries;

                                       28
<PAGE>

     o    protectionist   laws  and   business   practices   that  favor   local
          competition;
     o    reduced protection for intellectual property rights in some countries;
     o    difficulties  enforcing  agreements through other legal systems and in
          complying with foreign laws;
     o    fluctuations in currency exchange rates;
     o    political and economic instability; and
     o    import or export licensing requirements.

Because our headquarters are located in Northern  California,  which is a region
containing  active  earthquake  faults if a natural disaster occurs or the power
energy crisis continues, our business could be shut down or severely impacted.

     Our business and operations  depend on the extent to which our facility and
products are protected  against  damage from fire,  earthquakes,  power loss and
similar events.  Despite  precautions  taken by us, a natural  disaster or other
unanticipated  problem  could,  among  other  things,  hinder our  research  and
development  efforts,  delay the shipment of our products and affect our ability
to receive and fulfill orders.

        Risks Associated With The Multiservice Broadband Access Industry

Intense  competition  in the market for our  telecommunications  products  could
prevent us from  increasing  or  sustaining  our net revenue and prevent us from
achieving or sustaining profitability.

     The  market  for   multiservice   broadband   access   products  is  highly
competitive.  We compete  directly with numerous  companies,  including  Adtran,
Alcatel,  Carrier  Access  Corporation,   Cisco  Systems,  Lucent  Technologies,
Siemens,  Verilink,  and Zhone  Technologies.  Many of our current and potential
competitors  have  longer  operating   histories,   greater  name   recognition,
significantly   greater   selling  and  marketing,   technical,   manufacturing,
financial,   customer  support,   professional  services  and  other  resources,
including  vendor-sponsored  financing programs.  As a result, these competitors
are able to devote greater  resources to the  development,  promotion,  sale and
support of their products to leverage  their customer bases and broaden  product
offerings to gain market share.  In addition,  our  competitors  may foresee the
course of market  developments  more accurately than we do and could develop new
technologies  that  compete  with  our  products  or even  render  our  products
obsolete.  We may  not  have  sufficient  resources  to  continue  to  make  the
investments  or  achieve  the  technological   advances   necessary  to  compete
successfully with existing or new competitors.  In addition,  due to the rapidly
evolving  markets in which we compete,  additional  competitors with significant
market    presence   and   financial    resources,    including    other   large
telecommunications  equipment  manufacturers,  may enter our markets and further
intensify competition.

     We believe that our existing OEM customers continuously evaluate whether to
offer their own  multiservice  broadband  access  devices.  If our OEM customers
decide to internally  design and sell their own  multiservice  broadband  access
devices,  or acquire one or more of our  competitors or their  broadband  access
technologies,  they could eliminate or  substantially  reduce their purchases of
our products. One of our OEM customers,  Lucent Technologies,  accounted for 18%
of our net revenue for the year ended December 31, 2002. In addition,  growth of
our  business  may  cause our OEM  customers,  including  Lucent,  to view us as
greater  competition.  Our OEM relationships  could also be harmed as we develop
and market new products  that may compete  directly with the products of our OEM
customer.  For  example,  our MBX product may compete with  products  offered by
Lucent,  which could adversely  affect our relationship  with that customer.  We
cannot assure you that our OEM customers  will continue to rely, or expand their
reliance, on us as an external source of supply for their multiservice broadband
access devices. Because we rely on one OEM customer for a substantial portion of
our net revenue,  a loss of sales to this OEM customer could  seriously harm our
business, financial condition and results of operations.

Sales  of  our  products  depend  on the  widespread  adoption  of  multiservice
broadband  access services and if the demand for  multiservice  broadband access
services  does not  develop,  then  our  results  of  operations  and  financial
condition could be harmed.

     Our business will be harmed if the demand for multiservice broadband access
services  does not increase as rapidly as we  anticipate,  or if our  customers'
multiservice  broadband  access  service  offerings are not well received in the
marketplace.  Critical  factors  affecting the  development of the  multiservice
broadband access services market include:

     o    the development of a viable business model for multiservice  broadband
          access services, including the capability to market, sell, install and
          maintain these services;

                                       29
<PAGE>

     o    the ability of  competitive  local  exchange  carriers,  or CLECs,  to
          obtain sufficient funding and to successfully grow their businesses.
     o    cost constraints,  such as installation,  space and power requirements
          at the central offices of incumbent local exchange carriers, or ILECs;
     o    compatibility  of equipment from multiple  vendors in service provider
          networks;
     o    evolving   industry   standards  for  transmission   technologies  and
          transport protocols;
     o    varying  and  uncertain  conditions  of  the  communications   network
          infrastructure,   including   quality   and   complexity,   electrical
          interference,   and  crossover   interference   with  voice  and  data
          telecommunications services; and
     o    domestic and foreign government regulation.

     The market for  multiservice  broadband  access devices may fail to develop
for these or other  reasons or may develop more slowly than  anticipated,  which
could harm our business.

If we fail to comply with regulations and evolving industry standards,  sales of
our existing and future products could be harmed.

     The markets for our products are  characterized by a significant  number of
communications  regulations  and  standards,  some of which are  evolving as new
technologies are deployed. Our customers may require our products to comply with
various  standards,  including those  promulgated by the Federal  Communications
Commission,  or FCC,  standards  established by  Underwriters  Laboratories  and
Telcordia Technologies or proprietary standards promoted by our competitors.  In
addition,  our key  competitors  may establish  proprietary  standards that they
might  not make  available  to us. As a  result,  we may not be able to  achieve
compatibility with their products.  Internationally,  we may also be required to
comply with standards established by  telecommunications  authorities in various
countries   as   well   as   with    recommendations    of   the   International
Telecommunications Union.

     We are  currently  certified  for ISO  9001  per  the  1994  standard.  Our
registration  expires in September 2003. We must be recertified against the new,
2000 ISO 9001  standard.  Failure to achieve  recertification  could  affect our
relationships  with many of our customers who require or prefer their vendors to
be ISO 9001 certified.

Our customers are subject to  government  regulation,  and changes in current or
future laws or regulations  that negatively  impact our customers could harm our
business.

     The jurisdiction of the FCC extends to the entire communications  industry,
including our customers.  Future FCC regulations  affecting the broadband access
industry,  our customers or their service  offerings may harm our business.  For
example,  FCC  regulatory  policies  that  affect the  availability  of data and
Internet  services may impede our customers'  penetration into markets or affect
the prices that they are able to charge. In addition,  international  regulatory
bodies are beginning to adopt standards and regulations for the broadband access
industry.  If our customers are hurt by; laws or  regulations  regarding;  their
business, products or service offerings, demand for our products may decrease.

                Additional Risks That May Affect Our Stock Price

Our stock has traded at or below $1.00 for more an  extended  period of time and
may be subject to delisting from the Nasdaq SmallCap Market.

     Our common stock has  recently  traded at or below $1.00 and was subject to
delisting  from the Nasdaq  National  Market.  After an oral hearing  before the
Nasdaq Listing  Qualifications  Panel, on September 20, 2002, the listing of our
common  stock was  transferred  from the  Nasdaq  National  Market to the Nasdaq
SmallCap Market.  Similar to the requirements of the Nasdaq National Market, one
of the continued  listing  requirements  for the Nasdaq  SmallCap  Market is the
$1.00 minimum bid price  requirement.  On October 2, 2002,  Nasdaq  granted us a
180-day grace period,  until March 30, 2003, to meet the $1.00 minimum bid price
requirement.  If shares of our common  stock do not meet the  minimum  $1.00 per
share closing bid price requirement on or before March 30, 2003, our stock could
be delisted  from the Nasdaq  Stock  Market.  If our stock is delisted  from the
Nasdaq Stock Market,  our  stockholders  could find it more difficult to dispose
of, and obtain, accurate quotations as to the market value of, their shares, and
the market price of our stock would likely decline further.

                                       30
<PAGE>

We may engage in future acquisitions or strategic investments that we may not be
able to successfully  integrate or manage, which could hurt our business.  These
acquisitions or strategic investments may also dilute our stockholders and cause
us to incur debt and assume contingent liabilities.

     We may review  acquisition  prospects and strategic  investments that could
complement our current product offerings,  augment our market coverage,  enhance
our technical capabilities or otherwise offer growth opportunities. For example,
in February 2001 we acquired Woodwind  Communications  Systems, Inc., a provider
of voice-over-broadband  network edge access solutions,  and in December 2001 we
acquired certain assets of Metrobility  Optical Systems,  Inc., in both cases in
exchange for shares of our common  stock.  The issuance of equity  securities in
connection with future  acquisitions or investments could  significantly  dilute
our investors. If we incur or assume debt in connection with future acquisitions
or investments,  we may incur interest charges that could increase our net loss.
We have little  experience in  evaluating,  completing,  managing or integrating
acquisitions and strategic  investments.  Acquisitions and strategic investments
may entail numerous integration risks and impose costs on us, including:

     o    difficulties  in  assimilating  acquired  operations,  technologies or
          products including the loss of key employees;
     o    unanticipated costs;
     o    diversion of management's attention from our core business concerns;
     o    adverse  effects on  business  relationships  with our  suppliers  and
          customers or those of the acquired businesses;
     o    risks  of  entering  markets  in  which  we have no or  limited  prior
          experience;
     o    assumption of contingent liabilities;
     o    incurrence of significant  amortization expenses related to intangible
          assets; and
     o    incurrence of significant write-offs.

Our stock price may be volatile, and you may not be able to resell our shares at
or above the price you paid, or at all.

     In August 2000 we  completed  our  initial  public  offering.  Prior to our
initial public offering there had not been a public market for our common stock.
The stock  market  in  general,  and the  Nasdaq  Stock  Market  and  technology
companies in particular,  have experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating  performance
of companies. The trading prices and valuations of many technology companies are
substantially  below historical levels.  These broad market and industry factors
may further  decrease the market price of our common  stock,  regardless  of our
actual operating performance.

Many corporate actions would be controlled by officers, directors and affiliated
entities, if they acted together, regardless of the desire of other investors to
pursue an alternative course of action.

     As of December  31,  2002,  our  directors,  executive  officers  and their
affiliated  entities  beneficially  owned  approximately  65% of our outstanding
common  stock after  giving  effect to the  stockholders  agreement  executed by
Jeffrey  Drazan and certain  entities  affiliated  with Sierra  Ventures.  These
stockholders, if they acted together, could exert control over matters requiring
approval by our stockholders, including electing directors and approving mergers
or other business combination transactions.  This concentration of ownership may
also  discourage,  delay or prevent a change in control  of our  company,  which
could deprive our  stockholders of an opportunity to receive a premium for their
stock as part of a sale of our company and might reduce our stock  price.  These
actions may be taken even if they are opposed by our other stockholders.

Delaware law, our corporate  charter and bylaws and our stockholder  rights plan
contain  anti-takeover  provisions  that  would  delay or  discourage  take over
attempts that stockholders may consider favorable.

     Provisions in our restated certificate of incorporation and bylaws may have
the  effect of  delaying  or  preventing  a change of  control or changes in our
management. These provisions include:

     o    the  right of the board of  directors  to elect a  director  to fill a
          vacancy created by the expansion of the board of directors;
     o    the  ability of the board of  directors  to alter our  bylaws  without
          obtaining stockholder approval;
     o    the establishment of a classified board of directors;

                                       31
<PAGE>

     o    the ability of the board of  directors to issue,  without  stockholder
          approval,  up to five million shares of preferred stock with terms set
          by the board of  directors  which  rights  could be senior to those of
          common stock; and
     o    the elimination of the right of stockholders to call a special meeting
          of stockholders and to take action by written consent.

     Each of these provisions could discourage  potential take over attempts and
could lower the market price of our common stock.

     We  have  adopted  a  stockholder  rights  plan  and  declared  a  dividend
distribution  of one  right  for  each  outstanding  share  of  common  stock to
stockholders  of record as of August 6,  2001.  Each  right,  when  exercisable,
entitles the  registered  holder to purchase from VINA one  one-thousandth  of a
share of a new series of preferred  stock,  designated as Series A Participating
Preferred Stock, at a price of $35.00 per one one-thousandth of a share, subject
to  adjustment.  The rights will  generally  separate  from the common stock and
become  exercisable  if any person or group acquires or announces a tender offer
to acquire 20% or more of our  outstanding  common stock  without the consent of
our board of directors.  Because the rights may  substantially  dilute the stock
ownership of a person or group  attempting  to take us over without the approval
of our board of  directors,  our  stockholder  rights  plan  could  make it more
difficult  for a third party to acquire us (or a  significant  percentage of our
outstanding capital stock) without first negotiating with our board of directors
regarding such acquisition.

     In addition,  because we are  incorporated in Delaware,  we are governed by
the  provisions of Section 203 of the Delaware  General  Corporation  Law. These
provisions may prohibit large  stockholders,  in particular  those owning 15% or
more of our outstanding  voting stock,  from merging or combining with us. These
provisions in our charter,  bylaws and under Delaware law could reduce the price
that  investors  might be willing  to pay for shares of our common  stock in the
future and result in the market price being lower than it would be without these
provisions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial  market risks related to interest  rates and foreign
currency   exchange  rates.   Our  investments  in  commercial  paper  and  debt
obligations are subject to interest rate risk, but due to the short-term  nature
of these investments,  interest rate changes would not have a material impact on
their value as of December 31, 2002. To date, our international  sales have been
denominated primarily in U.S. dollars, and accordingly, a hypothetical change of
10% in the foreign  currency  exchange rates would not have a material impact on
our consolidated financial position or the results of operations. The functional
currency of our subsidiary in the United  Kingdom is the U.S.  dollar and as the
local  accounts  are  maintained  in British  pounds,  we are subject to foreign
currency  exchange  rate  fluctuations  associated  with  remeasurement  to U.S.
dollars.  A hypothetical  change of 10% in the foreign  currency  exchange rates
would not have a material impact on our consolidated  financial  position or the
results of operations.


                                       32
<PAGE>


Item 8. Consolidated Financial Statements

                   Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----

<S>                                                                                          <C>
Independent Auditors' Report .............................................................   34
Consolidated Balance Sheets as of December 31, 2001 and 2002 .............................   35
Consolidated Statements of Operations for the Years Ended December 31, 2000, 2001 and 2002   36
Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the Years Ended
 December 31, 2000, 2001 and 2002 ........................................................   37
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002   39
Notes to Consolidated Financial Statements ...............................................   40
</TABLE>


                                       33
<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
VINA Technologies, Inc.
Newark, California

We  have  audited  the   accompanying   consolidated   balance  sheets  of  VINA
Technologies  and  subsidiaries  (the Company) as of December 31, 2001 and 2002,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 2002.
Our audits also included the financial statement schedule listed in the Index at
Item 15 (a) (2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of VINA Technologies and subsidiaries
as of December 31, 2001 and 2002 and the results of their  operations  and their
cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.  Also,  in  our  opinion,  such  financial  statement  schedule,   when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.

As discussed in Note 2 to the  consolidated  financial  statements,  in 2002 the
Company  changed its method of  accounting  for  goodwill  and other  intangible
assets to conform to  Statement  of  Financial  Accounting  Standards  No.  142,
"Goodwill and Other Intangible Assets".

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the Company's  recurring  losses from  operations  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  concerning  these  matters are also  described  in Note 1. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


San Jose, California
January 22, 2003
(February 28, 2003 as to Note 15)


                                       34
<PAGE>


                             VINA TECHNOLOGIES, INC.
                           Consolidated Balance Sheets
               (In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                      2001          2002
                                                                                  -----------  -----------
                                     ASSETS
Current assets:
<S>                                                                                <C>          <C>
   Cash and cash equivalents ...................................................   $  15,805    $   4,567
   Restricted cash .............................................................         --         3,500
   Short-term investments ......................................................         500           50
   Common stock subscription receivable ........................................       9,589           --
   Accounts receivable, less of allowance for doubtful accounts
     of  $457 in 2001 and $245 in 2002 .........................................       8,059        3,348
   Inventories .................................................................       5,733        3,367
   Deposits ....................................................................          69        1,042
   Prepaid expenses and other ..................................................       1,493        1,312
                                                                                   ---------    ---------
        Total current assets ...................................................      41,248       17,186
Property and equipment, net ....................................................       5,271        1,968
Other assets ...................................................................         356           32
Acquired intangibles, net ......................................................       5,663        1,394
Goodwill, net ..................................................................      26,426           --
                                                                                   ---------    ---------
        Total assets ...........................................................   $  78,964    $  20,580
                                                                                   =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .............................................................   $   7,798    $   2,979
  Accrued compensation and related benefits ....................................       2,234          900
  Accrued warranty .............................................................         696          414
  Other current liabilities ....................................................       2,708        1,915
  Short-term debt ..............................................................          --        3,000
                                                                                   ---------    ---------
  Total current liabilities ....................................................      13,436        9,208

Commitments and Contingencies (Note 9)

Stockholders' equity:
  Convertible preferred stock; $0.0001 par value; 5,000,000 shares
      authorized; none outstanding .............................................          --           --
  Common stock; $0.0001 par value; 125,000,000 shares authorized: 2001 and 2002,
      shares outstanding: 2001, 62,013,759; 2002, 62,080,636 ...................           6            6
  Additional paid-in capital ...................................................     194,814      189,297
  Deferred stock compensation ..................................................      (7,106)        (315)
  Accumulated deficit ..........................................................    (122,186)    (177,616)
                                                                                   ---------    ---------
        Total stockholders' equity .............................................      65,528       11,372
                                                                                   ---------    ---------
        Total liabilities and stockholders' equity .............................   $  78,964    $  20,580
                                                                                   =========    =========

</TABLE>

                 See notes to consolidated financial statements

                                       35
<PAGE>

                             VINA TECHNOLOGIES, INC.
                      Consolidated Statements of Operations
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                              Years Ended
                                                                              December 31,
                                                                              ------------
                                                                     2000        2001        2002
                                                                     ----        ----        ----

<S>                                                               <C>          <C>         <C>
Net revenue ....................................................  $  32,078    $ 45,112    $ 25,143
Cost of revenue (excluding stock-based compensation) ...........     19,240      28,714      17,534
                                                                   --------    --------    --------
Gross profit (excluding stock-based compensation) ..............     12,838      16,398       7,609
                                                                   --------    --------    --------
Costs and expenses:
   Research and development (excluding stock-based compensation)     12,609      18,841      13,931
   Selling, general and administrative (excluding stock-based
     compensation) .............................................     21,124      22,697      14,515
   Stock-based compensation, net (*) ...........................     24,169      10,570       1,276
   In-process research and development .........................         --       5,081          --
   Amortization of intangible assets ...........................         --       8,243         789
   Impairment of goodwill and intangible assets ................         --          --      29,783
   Restructuring expenses (excluding stock-based compensation) .         --         991       2,941
                                                                   --------    --------    --------
        Total costs and expenses ...............................     57,902      66,423      63,235
                                                                   --------    --------    --------
Loss from operations ...........................................    (45,064)    (50,025)    (55,626)
Interest income ................................................      1,757       1,486         207
Interest expense ...............................................        (25)         --         (11)
Other (expense) ................................................         --        (103)         --
                                                                   --------    --------    --------
Net loss .......................................................  $( 43,332)   $(48,642)   $(55,430)
                                                                   ========    ========    ========
Net loss per share, basic and diluted ..........................  $   (2.63)   $  (1.31)   $  (0.90)
                                                                   ========    ========    ========
Shares used in computation, basic and diluted ..................     16,467      37,121      61,643
                                                                   ========    ========    ========

* Stock-based compensation, net:
      Cost of revenue ..........................................  $   1,855    $  1,016    $    520
      Research and development .................................      7,985       4,446       1,135
      Selling, general and administrative ......................     14,329       7,677       1,930
      Restructuring benefit ....................................         --      (2,569)     (2,309)
                                                                   --------    --------    --------
         Total .................................................   $ 24,169    $ 10,570    $  1,276
                                                                   ========    ========    ========
</TABLE>


                 See notes to consolidated financial statements
                                       36
<PAGE>
                             VINA TECHNOLOGIES, INC.
     Consolidated Statements of Stockholders' Equity and Comprehensive Loss
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                Convertible
                                              Preferred Stock               Common Stock
                                        -------------------------    -------------------------     Additional       Deferred
                                                                                                     Paid-In          Stock
                                           Shares        Amount         Shares         Amount        Capital      Compensation
                                           ------        ------         ------         ------        -------      ------------

<S>                                    <C>                  <C>       <C>                <C>        <C>            <C>
Balances, December 31, 1999........      14,290,517           1         8,746,081          1          44,081         (13,523)
Comprehensive loss:
   Net loss........................              --          --                --         --              --              --
   Other comprehensive
       income, net of tax:
 Unrealized gain on available-for-
    sale investments...............              --          --                --         --              --              --
 Comprehensive loss................              --          --                --         --              --              --
Exercise of stock options..........              --          --         3,081,973         --           3,573              --
Repurchase of common stock.........              --          --          (425,866)        --            (231)             --
Sale of Series E convertible preferred
 stock (net of issuance of costs of $8)   3,404,140           1                --         --          23,820              --
Issuance of common stock (net of
   issuance costs of $4,967).......              --          --         3,450,000         --          36,433              --
Issuance of non-employee stock option
   for services....................              --          --                --         --             635              --
Conversion of convertible preferred
stock..............................     (17,694,657)         (2)       17,694,657          2              --              --
Deferred stock compensation........              --          --                --         --          36,397         (36,397)
Amortization of deferred stock
   compensation....................              --          --                --         --              --          23,534
                                         ----------      ------        ----------       ----        --------        --------
Balances, December 31, 2000........              --          --        32,546,845          3         144,708         (26,386)
Comprehensive loss:
   Net loss........................              --          --                --         --              --              --
 Other comprehensive
   loss, net of tax:
 Reclassification adjustment for
   gains included in net income....              --          --                --         --              --              --

Comprehensive loss.................              --          --                --         --              --              --

Exercise of stock options..........              --          --         1,018,448         --             485              --
Sale of common stock under
   employee stock purchase plan....              --          --           287,749         --             760              --
Repurchase of common stock.........              --          --          (355,924)        --            (706)             --
Issuance of common stock in
   acquisition.....................              --          --         4,148,745          1          42,643            (588)
Issuance of common stock
   for asset purchase..............              --          --         2,217,527         --           2,549              --
Private placement of common stock
   (net of issuance costs of $505).              --          --        22,150,369          2          11,721              --
Sale of warrants attached to common
   stock in private placement......              --          --                --         --           1,952              --
Stock-based compensation associated
   with private placement..........              --          --                --         --             289              --
Issuance of non-employee stock option
   for services....................              --          --                --         --               4              --
Net reversal of deferred stock
   compensation from forfeitures...              --          --                --         --          (9,591)          9,591
Amortization of deferred stock
   compensation....................              --          --                --         --              --          10,277
                                          ---------   ---------      ------------       ----        --------        --------
Balances, December 31, 2001                      --          --        62,013,759          6         194,814          (7,106)
Comprehensive loss:
   Net loss........................              --          --                --         --              --              --

Exercise of stock options..........              --          --           213,948         --              96              --
Repurchase of common stock.........              --          --           (78,982)        --            (107)             --
Sale of common stock under
  employee stock purchase plan.....              --          --           194,707         --             133              --
Close of Woodwind purchase escrow
   return of held shares...........              --          --          (262,796)        --            (124)             --
Net reversal of deferred stock
   compensation from forfeitures...              --          --                --         --          (5,515)          5,515
Amortization of deferred stock
   compensation....................              --          --                --         --              --           1,276
                                          ---------   ---------      ------------       ----        --------        --------
Balances, December 31, 2002........              --   $      --        62,080,636   $      6       $ 189,297       $    (315)
                                          =========   =========      ============   ========       =========       =========
</TABLE>

                 See notes to consolidated financial statements

                                     37
<PAGE>
                             VINA TECHNOLOGIES, INC.
     Consolidated Statements of Stockholders' Equity and Comprehensive Loss
                      (In thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                          Accumulated
                                                                             Other            Total
                                                        Accumulated      Comprehensive    Stockholders'     Comprehensive
                                                          Deficit           Income           Equity             Loss
                                                          -------           ------           ------             ----

<S>                                                        <C>              <C>               <C>           <C>
     Balances, December 31, 1999....................       (30,212)             --                348

     Comprehensive loss:
      Net loss......................................       (43,332)             --            (43,332)        $(43,332)
      Other comprehensive income, net of tax:
      Unrealized gain on available-for-sale
        investments.................................            --              48                 48               48
                                                                                                              --------

     Comprehensive loss.............................            --              --                 --         $(43,284)
                                                                                                              ========
     Exercise of stock options......................            --              --              3,573
     Repurchase of common stock.....................            --              --               (231)
     Sale of Series E convertible preferred
      stock (net of issuance costs of $8)...........            --              --             23,821
     Issuance of common stock (net of
      (issuance costs of $4,967)....................            --              --             36,433
     Issuance of non-employee stock
      options for services..........................            --              --                635
     Conversion of convertible preferred stock......            --              --                 --
     Deferred stock compensation....................            --              --                 --
     Amortization of deferred stock
      compensation..................................            --              --             23,534
                                                         ---------           -----          ---------
     Balances, December 31, 2000....................       (73,544)             48             44,829
     Comprehensive loss:
      Net loss......................................       (48,642)             --            (48,642)        $(48,642)
      Other comprehensive loss, net of tax:
      Reclassification adjustment for
      gains included in net income..................            --             (48)               (48)             (48)
                                                                                                              --------
     Comprehensive loss.............................            --              --                 --         $(48,690)
                                                                                                              ========
     Exercise of stock options......................            --              --                485
     Sale of common stock under
      employee stock purchase plan..................            --              --                760
     Repurchase of common stock.....................            --              --               (706)
     Issuance of common stock in acquisition........            --              --             42,056
     Issuance of common stock
        for asset purchase..........................            --              --              2,549
     Private placement of common stock
        (net of issuance costs of $505).............            --              --             11,723
     Sale of warrants attached to common
        stock in private placement..................            --              --              1,952
     Stock-based compensation associated
        with private placement......................            --              --                289
     Issuance of non-employee stock option
        for services................................            --              --                  4
     Net reversal of deferred stock
        compensation from forfeitures...............            --              --                 --
     Amortization of deferred stock
        compensation, net of forfeitures............            --              --             10,277
                                                         ---------           -----          ---------
     Balances, December 31, 2001                          (122,186)             --             65,528
     Comprehensive loss:
        Net loss....................................       (55,430)             --            (55,430)        $(55,430)
                                                                                                              ========
     Exercise of stock options......................            --              --                 96
     Repurchase of common stock.....................            --              --               (107)
     Sale of common stock under
       employee stock purchase plan.................            --              --                133
     Close of Woodwind purchase escrow
        return of held shares.......................            --              --               (124)
     Net reversal of deferred stock
        compensation from forfeitures...............            --              --                 --
     Amortization of deferred stock compensation....            --              --              1,276
                                                         ---------           -----          ---------
     Balances, December 31, 2002....................     $(177,616)          $  --          $  11,372
                                                         =========           =====          =========
</TABLE>

                 See notes to consolidated financial statements

                                       38
<PAGE>
                             VINA TECHNOLOGIES, INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                --------------------------------------
                                                                                    2000          2001          2002
                                                                                -----------   -----------   ----------

 Cash flows from operating activities:
<S>                                                                               <C>           <C>           <C>
   Net loss................................................................       $(43,332)     $(48,642)     $(55,430)
   Reconciliation of net loss to net cash used in operating activities:
     Depreciation and amortization.........................................          1,042        10,080         2,792
     Disposal of property and equipment....................................             --            --         1,947
     Impairment of goodwill and intangible assets..........................             --            --        29,783
     Stock-based compensation, net.........................................         24,169        10,570         1,276
     In-process research and development...................................             --         5,081            --
     Accrued interest income on short-term investments.....................         (1,180)          797            --
     Changes in operating assets and liabilities, net of effects from
      acquisition in 2001:
         Accounts receivable...............................................         (2,774)       (2,810)        4,711
         Inventories.......................................................         (1,877)       (3,416)        2,366
         Prepaid expenses and other........................................         (2,483)        1,215          (792)
         Other assets......................................................            (58)         (220)          324
         Accounts payable..................................................          5,015        (1,294)       (4,819)
         Accrued compensation and related benefits.........................          1,697          (898)       (1,334)
         Accrued warranty..................................................            237            10          (282)
         Other current liabilities.........................................          1,455          (853)         (793)
                                                                                  --------      --------      --------
             Net cash used in operating activities.........................        (18,089)      (30,380)      (20,251)
                                                                                  --------      --------      --------

 Cash flows from investing activities:
     Purchases of property and equipment...................................         (3,782)       (1,108)         (648)
     Purchases of short-term investments...................................        (50,499)       (1,050)          (50)
     Proceeds from sales/maturities of short-term investments..............         15,000        36,432            --
     Net cash from acquisition.............................................             --          (454)           --
                                                                                  --------      --------       -------
     Net cash provided by (used in) investing activities...................        (39,281)       33,820          (698)
                                                                                  --------      --------       -------

 Cash flows from financing activities:
     Net proceeds from sale of convertible preferred stock.................         23,821            --            --
     Net proceeds from sale of common stock................................         36,433         4,086         9,589
     Proceeds from the sale of stock under employee stock purchase and stock
         option plans......................................................          3,573         1,245           229
     Repurchase of common stock............................................           (231)         (706)         (107)
     Proceeds from the issuance of short-term debt.........................             --            --         3,000
     Restricted cash related to short-term debt............................             --            --        (3,000)
     Proceeds from issuance of long-term debt..............................            375            --            --
     Repayments of long-term debt..........................................         (1,429)           --            --
                                                                                  --------      --------      --------
             Net cash provided by financing activities.....................         62,542         4,625         9,711
                                                                                  --------      --------      --------

 Net change in cash and cash equivalents...................................          5,172         8,065       (11,238)
 Cash and cash equivalents, Beginning of year..............................          2,568         7,740        15,805
                                                                                  --------      --------      --------
 Cash and cash equivalents, End of year....................................       $  7,740      $ 15,805      $  4,567
                                                                                  ========      ========      ========
 Noncash investing and financing activities:
     Deferred stock compensation, net of forfeitures.......................       $ 36,397      $ (9,591)     $     --
                                                                                  ========      ========      ========
     Conversion of convertible preferred stock into common stock...........       $ 48,120      $     --      $     --
                                                                                  ========      ========      ========
     Changes in unrealized gain on available-for-sale investments                 $     80      $    (80)     $     --
                                                                                  ========      ========      ========
     Common stock subscription receivable..................................       $     --      $  9,589      $     --
                                                                                  ========      ========      ========
     Issuance of common stock in acquisition...............................       $     --      $ 42,056      $     --
                                                                                  ========      ========      ========
     Issuance of common stock for asset purchase...........................       $     --      $  2,549      $     --
                                                                                  ========      ========      ========
 Supplemental disclosures of cash flow information:

        Cash paid for interest.............................................       $     64      $     --      $     11
                                                                                  ========      ========      ========
         Cash paid for taxes...............................................       $     10      $     19      $     21
                                                                                  ========      ========      ========
</TABLE>
                 See notes to consolidated financial statements



                                       39
<PAGE>




                             VINA TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years Ended December 31, 2000, 2001 and 2002

1. Going Concern

     The accompanying financial statements have been prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course  of  business.  As  shown  in the  financial
statements,  during the year ended  December 31, 2002,  the Company used cash in
operating  activities of $20.3 million. As of December 31, 2002, the Company had
cash and cash  equivalents of $4.6 million and an accumulated  deficit of $177.6
million. These factors, among others, indicate that the Company may be unable to
continue as a going  concern for a  reasonable  period of time.  The Company has
implemented,  and is continuing to pursue,  aggressive cost cutting  programs in
order to preserve  available cash. The Company is also evaluating  other sources
of funding,  such as the line of credit secured in February 2003. (See Note 15).
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

2. Business and Significant Accounting Policies

     Business - VINA Technologies,  Inc. (the Company or VINA),  incorporated in
June 1996, designs,  develops,  markets and sells multiservice  broadband access
communications  equipment that enables  telecommunications  service providers to
deliver  bundled voice and data services.  The Company has incurred  significant
losses since  inception and expects that net losses and negative cash flows from
operations will continue for the foreseeable future.

     Basis of Presentation - The consolidated  financial  statements include the
accounts of VINA  Technologies,  Inc.  and its wholly  owned  subsidiaries.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

     Use of Estimates - The  preparation  of financial  statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
net revenues and expenses during the reporting period. Such management estimates
include an  allowance  for  doubtful  accounts  receivable,  reserves  for sales
returns, provisions for inventory to reflect the net realizable value, valuation
allowances  against deferred income taxes,  restructuring  reserves and accruals
for product  warranty and other  liabilities.  Actual  results could differ from
those estimates.

     Certain  Significant Risks and Uncertainties - Financial  instruments which
potentially  subject  the  Company  to  concentrations  of credit  risk  consist
primarily of cash equivalents,  short-term  investments and accounts receivable.
The Company only  invests its cash in highly  liquid and high  investment  grade
instruments.  The  Company  sells its  products  to  distributors  and end users
primarily in the United States and  generally  does not require its customers to
provide collateral or other security to support accounts  receivable.  To reduce
credit risk,  management  performs ongoing credit  evaluations of its customers'
financial  condition and maintains  allowances for estimated  potential bad debt
losses.  The  Company's  contract  manufacturer  has  obtained  or has on  order
substantial  amounts  of  inventory  to meet its  revenue  forecasts.  If future
shipments do not utilize the committed inventory,  the contract manufacturer has
the right to bill us for any excess component and finished goods inventory.  The
Company also has a non-cancelable  purchase order with a major chip supplier for
one of its critical components. (See Note 9)

     The Company participates in a dynamic high technology industry and believes
that changes in any of the following areas could have a material  adverse effect
on the Company's future consolidated  financial position,  results of operations
or cash flows:  advances,  trends in new  technologies  and developing  industry
standards; competitive pressures in the form of new products or price reductions
on current  products;  changes in the overall demand for products offered by the
Company;  changes in certain strategic  relationships or customer relationships;
litigation or claims against the Company based on intellectual property, patent,
product,  regulatory or other factors;  risk associated with changes in domestic
and  international  economic and/or  political  conditions or  regulations;  the
Company's  ability  to obtain  additional  capital to  support  operations;  the
Company's ability to integrate acquired  businesses and the Company's ability to
attract and retain employees necessary to support its growth.


                                       40
<PAGE>

     Certain  components and  subassemblies  used in the Company's  products are
purchased from a sole supplier or a limited group of suppliers. In addition, the
Company  outsources  the production  and  manufacture of its access  integration
devices to a sole turnkey manufacturer.  Any manufacturing disruption,  shortage
of supply of products or components,  or the inability of the Company to procure
products or components from alternative sources on acceptable terms could have a
material  adverse  effect  on the  Company's  business,  consolidated  financial
position and results of operations.

     Cash Equivalents - The Company  classifies all investments in highly liquid
debt instruments with maturities at the date of purchase of three months or less
as cash equivalents.

     Restricted  Cash - Restricted  cash consists of cash and a  certificate  of
deposit (CD) with a maturity of less than one year. This cash and CD are carried
at fair value and are restricted as collateral for specified  obligations  under
certain line of credit and lease agreements.

     Short-Term   Investments  -  Short-term   investments  consist  of  various
instruments  with  investment  grade  credit  ratings.   All  of  the  Company's
short-term  investments  are  classified  as  "available-for-sale"  based on the
Company's  intended  use and are  stated at fair  market  value  based on quoted
market prices. The difference between amortized cost and fair value representing
unrealized  holding gains or losses is recorded as a component of  stockholders'
equity, net of tax, as accumulated other comprehensive  income. Gains and losses
on sales are determined on a specific identification basis.

     Fair Value of Financial  Instruments - The Company's financial  instruments
include cash equivalents and short-term investments. Cash equivalents are stated
at cost which  approximates  fair market  value based on quoted  market  prices.
Short-term  investments  are stated at fair market value based on quoted  market
prices.

     Inventories  -  Inventories  are  stated  at the  lower of cost  (first-in,
first-out method) or market.

     Deposits - Deposits  consist of money  deposited with specific  vendors and
landlords as security.  The carrying  amounts are the values to be returned upon
cessation of security requirements.

     Prepaid  and other  assets - Prepaid and other  assets  consists of various
interest and other non-revenue receivables, prepaid licenses and royalties.

     Property  and  Equipment - Property and  equipment  are stated at cost less
accumulated  depreciation and  amortization.  Depreciation is computed using the
straight-line  method  over  estimated  useful  lives of  three  to five  years.
Amortization of leasehold improvements is computed over the shorter of the lease
term or the estimated useful lives of the related assets.

     Long-Lived Assets - The Company evaluates  long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when the
sum of the undiscounted future net cash flows expected to result from the use of
the asset and its eventual  disposition is less than its carrying  amount.  Such
impairment loss would be measured as the difference  between the carrying amount
of the asset and its fair value based on the present  value of estimated  future
cash flows.

     Short-term debt - Short-term debt consists of a committed revolving line of
credit with a term of one year, which bears interest at a rate of the Prime rate
plus two  percent.  The line is secured by $3 million of  restricted  cash as of
December  31,  2002.  The line of credit is  carried at fair  value.  The entire
balance was repaid in January 2003.

     Income  Taxes - The Company  accounts  for income  taxes under an asset and
liability  approach.  Deferred  income  taxes  reflect  the net tax  effects  of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting purposes and the amounts used for income tax purposes,  and
operating  loss and tax credit  carryforwards  measured  by  applying  currently
enacted tax laws.  A valuation  allowance is provided to reduce net deferred tax
assets to an amount that is more likely than not to be realized.

     Stock-Based  Compensation - The Company accounts for stock-based  awards to
employees  using the  intrinsic  value  method  in  accordance  with  Accounting

                                       41
<PAGE>

Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees,
and to nonemployees  using the fair value method in accordance with Statement of
Financial  Accounting  Standards  (SFAS) No.  123,  Accounting  for  Stock-Based
Compensation.  See Note 10 for discussion of assumptions  used in computing fair
values and the pro forma results of  operations,  had the Company  accounted for
employee stock-based compensation in accordance with SFAS No. 123.

     Revenue  Recognition  - The  Company  recognizes  revenue  when  persuasive
evidence of an arrangement  exists,  delivery has occurred or services have been
rendered,  the price is fixed and determinable and  collectibility is reasonably
assured.  The  Company  generates  revenue  from sale of  products  and  related
services to  communications  service  providers and through  original  equipment
manufacturers and value added resellers.

     Product  revenue is  generated  from the sale of  communications  equipment
embedded with software that is essential to its functionality,  and accordingly,
the  Company  accounts  for  these  transactions  in  accordance  with SEC Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial  Statements,
and Statement of Position  (SOP) 97-2,  Software  Revenue  Recognition.  Product
revenue is  recognized  when all SAB No. 101 and SOP 97-2 criteria are met which
generally occurs at the time of shipment. In multiple element arrangements where
there are  undelivered  elements  at the time of  shipment,  product  revenue is
recognized  at the time of shipment  as the  residual  value of the  arrangement
after  allocation  of fair  value to the  undelivered  elements  based on vendor
specific  objective  evidence  (VSOE).   There  is  no  VSOE  on  the  sales  of
communications equipment due to the wide range in customer discounts provided by
the Company.

     Service  revenue is generated from the sale of  installation,  training and
postcontract  customer  support (PCS) agreements  related to the  communications
equipment.  The Company also accounts for these  transactions in accordance with
SAB No. 101 and SOP 97-2, and as such recognizes revenue when all of the related
revenue recognition  criteria are met which is: (i) at the time the installation
or training  service is  delivered;  and (ii)  ratably  over the term of the PCS
agreement. In multiple element arrangements where these services are undelivered
when the communications  equipment is shipped, the Company defers the fair value
of  these  undelivered  elements  based on VSOE and  recognizes  revenue  as the
services are delivered.  VSOE of these  elements is based on  stand-alone  sales
(including  renewal rates of PCS  agreements)  of the services.  For all periods
presented service revenue has been less than 10% of total net revenue.

     The Company  additionally  records a provision for estimated  sales returns
and warranty costs at the time the product revenue is recognized.

     Research and  Development - Costs incurred in research and  development are
charged to operations as incurred.

     Foreign  Currency  - The  functional  currency  of  the  Company's  foreign
subsidiary is the U.S. dollar.  Transaction and  remeasurement  gains and losses
were not significant for any of the periods presented.

     Net Loss per Share - Basic earnings per share (EPS)  excludes  dilution and
is computed by dividing  net loss  attributable  to common  stockholders  by the
weighted  average number of common shares  outstanding for the period  excluding
the weighted  average common shares subject to repurchase.  Diluted EPS reflects
the potential  dilution  that could occur if  securities  or other  contracts to
issue common  stock  (convertible  preferred  stock,  common  stock  options and
warrants  using the  treasury  stock  method) were  exercised or converted  into
common  stock.  Potential  common  shares in the  diluted  EPS  computation  are
excluded in net loss periods, as their effect would be antidilutive.

     Comprehensive   Loss  -  In  accordance   with  SFAS  No.  130,   Reporting
Comprehensive  Income,  the Company reports by major  components and as a single
total, the change in its net assets during the period from nonowner sources in a
consolidated  statement of comprehensive  loss, which has been included with the
consolidated statements of stockholders' equity.

     Related  Party  Transactions  - The  Company  accounts  for  related  party
transactions  as arm's length  agreements in the normal  course of business.  In
2002, the Company  incurred  consulting  expenses of $100,000 from a director of
the Company.  As of December  31,  2002,  $20,000 of such expense is included in
accrued liabilities.

     New Accounting Standards - In June 2001, the Financial Accounting Standards
Board  (FASB)  issued  SFAS No.  141,  Business  Combinations  and SFAS No. 142,
Goodwill and Other  Intangible  Assets.  SFAS No. 141 requires that all business
combinations  initiated  after June 30, 2001 be accounted for under the purchase
method and addresses the initial  recognition  and  measurement  of goodwill and
other  intangible  assets  acquired  in a  business  combination.  SFAS No.  142

                                       42
<PAGE>

addresses the initial  recognition and measurement of intangible assets acquired
outside of a business  combination  and the  accounting  for  goodwill and other
intangible  assets subsequent to their  acquisition.  SFAS No. 142 provides that
intangible  assets with finite  useful lives be amortized  and that goodwill and
intangible  assets  with  indefinite  lives will not be  amortized,  but will be
tested at least annually for  impairment.  The Company  adopted SFAS No. 142 for
its fiscal year  beginning  January 1, 2002.  Upon adoption of SFAS No. 142, the
Company  stopped the  amortization of intangible  assets with  indefinite  lives
(goodwill,  which includes the reclass of  workforce-in-place,  and  tradenames)
with a net  carrying  value of $27.6  million at  December  31,  2001 and annual
amortization of $8.8 million that resulted from business combinations  initiated
prior to the adoption of SFAS No. 141. The deterioration of the telecom industry
and the decline of our product  sales in 2002 were  factors  that  required  the
Company to evaluate  goodwill,  determine it to be impaired,  and record a $27.3
million impairment charge during 2002.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal  of  Long-Lived  Assets.  " SFAS  No.  144  supersedes  SFAS  No.  121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be  Disposed  Of, and  addresses  financial  accounting  and  reporting  for the
impairment or disposal of long-lived assets. This statement is effective for the
Company on January 1, 2002. The  deterioration  of the telecom  industry and the
decline of our product  sales in 2002 were factors that  required the Company to
evaluate intangibles,  determine them to be impaired,  and record a $2.5 million
impairment charge during 2002.

     In November 2002, the FASB issued FASB  Interpretation  No. 45 "Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness of Others" ("FIN 45"). FIN 45 requires the guarantor
to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation  undertaken in issuing the guarantee.  It also  elaborates on the
disclosures  to be made by a guarantor  in its  financial  statements  about its
obligations under certain guarantees that it has issued and to be made in regard
of product warranties. Disclosures required under FIN 45 are already included in
these  financial  statements,  however,  the  initial  recognition  and  initial
measurement  provisions of this FIN are  applicable  on a  prospective  basis to
guarantees  issued or modified  after  December 31,  2002.  The Company does not
expect  the  adoption  of FIN 45 to have a material  effect on its  consolidated
financial statements.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). SFAS No. 146 addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies EITF 94-3 "Liability  Recognition for Certain Employee Termination
Benefits and other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)".  SFAS  No.  146  requires  that  a  liability  for a cost
associated with an exit or disposal activity to be recognized when the liability
is incurred.  Under EITF 94-3, a liability for an exit cost as generally defined
in EITF 94-3 was recognized at the date of the commitment to an exit plan.  SFAS
No. 146  states  that a  commitment  to a plan,  by  itself,  does not create an
obligation  that meets the  definition of a liability.  Therefore,  SFAS No. 146
eliminates the definition and requirements for recognition of exit costs in EITF
94-3.  It  also  establishes  that  fair  value  is the  objective  for  initial
measurement of the  liability.  SFAS No. 146 is to be applied  prospectively  to
exit or disposal activities  initiated after December 31, 2002. The Company does
not  expect  the  adoption  of SFAS No.  146 to have a  material  effect  on its
consolidated financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition  and  Disclosure."  This Statement amends SFAS No. 123,
Accounting  for  Stock-Based  Compensation,  to provide  alternative  methods of
transition  to SFAS No. 123's fair value method of  accounting  for  stock-based
employee  compensation.  This Statement also amends the disclosure  provision of
SFAS No. 123 and APB No. 28, Interim Financial Reporting,  to require disclosure
in the summary of significant  accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee  compensation on reported
net income and  earnings per share in annual and interim  financial  statements.
The Company has elected to continue  accounting  for employee stock option plans
according  to APB No. 25, and the Company  adopted the  disclosure  requirements
under SFAS No. 148 commencing on December 31, 2002.

3. Short-Term Investments

     The Company's short-term investments at December 31, 2002 and 2001 consists
of certificates of deposit in the amount of $50,000 and $500,000,  respectively.
The  amortized  cost of the  investments  is  equivalent  to the  fair  value at
December 31, 2002 and 2001.

     Available-for-sale   debt  securities  and   certificates  of  deposit  are
classified as current assets as all maturities are within one year.


                                       43
<PAGE>

4. Inventories

     Inventories consist of the following (in thousands):

                                                       December 31,
                                                       ------------
                                                    2001         2002
                                                    ----         ----
          Raw materials and subassemblies.....     $1,783       $1,684
          Finished goods......................      3,950        1,683
                                                   ------       ------
          Inventories.........................     $5,733       $3,367
                                                   ======       ======

5. Property and Equipment

     Property and equipment consists of the following (in thousands):

                                                            December 31,
                                                            ------------
                                                         2001         2002
                                                         ----         ----
          Computer equipment and software...........    $ 3,066     $ 1,531
          Machinery and equipment...................      4,449       3,415
          Furniture and fixtures....................        989         671
          Leasehold improvements....................        540         268
                                                        -------     -------
                                                          9,044       5,885
          Accumulated depreciation and amortization.     (3,773)     (3,917)
                                                        -------     -------
          Property and equipment, net...............    $ 5,271     $ 1,968
                                                        =======     =======

6. Acquisitions

     Woodwind Communications

     On February 27, 2001,  the Company  completed the  acquisition  of Woodwind
Communications  Systems,  Inc.  (Woodwind),  a provider of  voice-over-broadband
network edge access solutions,  based in Germantown,  Maryland.  The acquisition
was accounted  for as a purchase in accordance  with APB No. 16. Under the terms
of the merger agreement,  the Company acquired all outstanding  capital stock of
Woodwind by paying  $7.5  million in cash and  issuing  4,148,745  shares of the
Company's  common  stock.  The  Company  assumed  Woodwind's  outstanding  stock
options,  which, if fully vested and exercised,  would result in the issuance of
an additional 1,106,892 shares of the Company's common stock. The total purchase
price as of February  27, 2001 has been  allocated  to the assets  acquired  and
liabilities  assumed  based on their  respective  fair  values  as  follows  (in
thousands):

Total purchase price:

Cash consideration...........    $  7,500
Common stock.................      39,465
Options assumed..............       2,591
Acquisition expenses.........         726
                                 --------
                                 $ 50,282
                                 ========
Purchase price allocation:

Fair market value
of net tangible assets
acquired at February 27, 2001..  $  6,728



                                       44

<PAGE>
                                            Economic
                                              Life
                                              ----
Intangible assets acquired:
 Workforce-In-Place...........      1,236       3
 Tradename....................        346       4
 Core technology..............      3,022       4
 Current technology...........        310       4
 In-process research
 and development..............      5,081       -
 Goodwill.....................     35,525       4
 Deferred tax liabilities.....     (1,966)      -
                                  -------
                                 $ 50,282
                                 ========

     The Company recorded a one-time charge of $5.1 million in the first quarter
of 2001 for purchased in-process research and development related to development
projects  that had not reached  technological  feasibility,  had no  alternative
future use, and for which successful  development was uncertain.  The conclusion
that  the  in-process   research  and  development   effort,   or  any  material
sub-component,  had no alternative  future use was reached in consultation  with
the Company's and Woodwind's management.

     Significant assumptions that were used to determine the value of in-process
technology, include the following: first, an income approach that focused on the
income producing capability of the acquired technology, and best represented the
presented value of the future economic  benefits the Company  expected to derive
from them;  second,  forecasted  net cash flows that the Company  expected might
result from the development effort were determined using projections prepared by
the Company's management; third, a discount rate of 25% was used, based upon the
estimated weighted average rate of return for Woodwind, which is consistent with
the implied  transaction  discount  rate;  and fourth,  a premium of 10% for the
in-process technology was added to reflect the additional risk of the in-process
technology, thus resulting in the use of an overall 35% discount rate.

     In  accordance  with FASB  Interpretation  No. 44,  Accounting  for Certain
Transactions  Involving Stock  Compensation,  the Company recorded the intrinsic
value,  measured as the difference between the grant price and fair market value
on the  acquisition  consummation  date,  of  unvested  options  assumed  in the
acquisition as deferred stock  compensation.  Such deferred stock  compensation,
which aggregated $588,000,  is recorded as a separate component of stockholders'
equity and will be amortized over the vesting term of the related  options.  For
the years ended December 31, 2001 and 2002, the Company  amortized  $125,000 and
$32,000,  respectively,  as stock-based compensation related to these options in
the accompanying consolidated statements of operations.

     The operating  results of Woodwind  have been included in the  accompanying
consolidated  statements  of  operations  since  the  date of  acquisition.  The
following  selected  unaudited pro forma combined  results of operations for the
years ended  December  31, 2000 and 2001 of the Company and  Woodwind  have been
prepared  assuming  that the  acquisition  had occurred at the  beginning of the
periods presented.  The following  unaudited pro forma financial  information is
not  necessarily  indicative of the actual  results that would have occurred had
the acquisition  been completed at the beginning of the period  indicated nor is
it indicative of future operating results (in thousands, except per share data):

                                                               Pro Forma
                                                             December 31,
                                                        ---------------------
                                                           2000         2001
                                                           ----         ----
   Net revenue........................................  $  32,299    $  45,112
   Net loss...........................................  $ (61,469)   $ (48,340)
   Net loss per share.................................  $   (2.98)   $   (1.28)
   Shares used in calculation of net loss per share...     20,616       37,790

     The pro forma  results of  operations  give effect to certain  adjustments,
including  amortization  of purchased  intangibles,  goodwill and deferred stock
compensation  associated  with the  acquisition.  The $5.1  million  charge  for
purchased  in-process  research and  development  has been excluded from the pro
forma results, as it is a material nonrecurring charge.

     Intellectual Property and Related Assets

     In December 2001, the Company purchased optical concentrator technology and
related  equipment  from a  related  party by  issuing  2,217,527  shares of the
Company's common stock valued at $2.5 million on the purchase date. In addition,
the Company incurred  approximately $676,000 in direct acquisition expenses. The
total  purchase  price of $3.2  million  was  allocated  on a fair  value  basis
resulting in $1.9 million of intellectual  property (intangible assets) and $1.3
million of fixed  assets.  The acquired  assets are being  amortized  over their
useful lives ranging from three to four years.


                                       45
<PAGE>

7. Acquired Intangibles and Goodwill, Net

     As the Company operates in one reportable segment, the design, development,
marketing and sale of multi-service  broadband access communications  equipment,
and has only one reporting unit, VINA consolidated,  the measurement of the fair
value for  goodwill  is its  market  capitalization.  The  deterioration  of the
telecom  industry  and the  decline in our  current  product  sales in the first
quarter,  were factors  that  required the Company to evaluate the fair value of
the intangible assets and goodwill.  Management  evaluated the fair value of the
Company as determined by its market  capitalization  against its carrying value,
net  assets,  and  determined  that the  intangible  assets  and  goodwill  were
impaired.  In addition,  under SFAS No. 144  "Accounting  for the  Impairment of
Disposal of Long-Lived  Assets" the Company  evaluated the intangible assets for
impairment  and  determined a portion of the  intangible  assets were  impaired.
Also,  under SFAS No. 142  "Goodwill  and Other  Intangible  Assets" the Company
evaluated the goodwill for impairment and determined  that it was impaired.  The
Company recorded a $29.8 million  impairment  charge during 2002. The amount was
comprised of $27.3 million of goodwill and $2.5 million intangible assets.

     Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                      December 31, 2001                            December 31, 2002

                                      Gross                                Gross
                       Amortization   Carrying Accumulated                 Carrying Accumulated  Impairment
                       Period         Amount   Amortization   Net          Amount   Amortization Loss          Net
                       ----------------------------------------------------------------------------------------------
<S>                     <C>           <C>      <C>         <C>            <C>       <C>          <C>
Core technology         4 years       $ 3,022  $   (630)   $ 2,392        $ 2,898   $   (935)    $ (1,963)          -
Current technology      4 years           310       (64)       246            310        (83)        (227)          -
Trade name              4 years           346       (73)       273            346        (73)        (273)          -
Intellectual property   4 years         1,859         -      1,859          1,859       (465)           -     $ 1,394
Workforce-in-place      3 years         1,236      (343)       893              -          -            -           -
                                    ---------------------------------------------------------------------------------
Total                                 $ 6,773  $ (1,110)   $ 5,663        $ 5,413   $ (1,556)    $ (2,463)    $ 1,394
                                    =================================================================================
</TABLE>

     All of VINA's  intangible  assets are  subject to  amortization  except for
workforce-in-place and tradename. Workforce in place was reallocated to goodwill
as of January 1, 2002.

Estimated future amortization expense is as follows (in thousands):

                     Fiscal year                  Total
                                                  -----
                            2003                  $ 465
                            2004                    465
                            2005                    464
                                     ------------------
              Total Amortization                $ 1,394
                                     ==================

     The changes in the  carrying  amount of  goodwill,  including  workforce in
place, for the year ended December 31, 2002 are as follows (in thousands):

Balance as of January 1, 2002             $    27,319
Impairment loss                               (27,319)
                                          -----------
Balance as of December 31, 2002           $         -
                                          ===========




                                       46
<PAGE>

     Had the provisions of FAS No. 142 been applied beginning on January 1, 2001
our net loss and net loss per share  would  have been as follows  (in  thousands
except per share amounts):

                                       Year Ended December 31,
                                       -----------------------
                                                 2001
                                                 ----
Net loss as reported                         $  (48,642)
Add back amortization:
    Goodwill                                      7,133
    Workforce-in-place                              343
     Tradename                                       73
                                      ---------------------------
Adjusted net loss                            $  (41,093)
                                      ===========================

EPS - basic and diluted,                     $    (1.31)
as reported
Goodwill,                                          0.20
workforce-in-place and
tradename amortization

                                      ---------------------------
Adjusted EPS                                 $    (1.11)
                                      ===========================

8. Restructurings

     During  the year  ended  December  31,  2001,  the  Company  announced  and
completed a  restructuring  plan that  included a workforce  reduction and other
operating reorganizations. As a result of the restructuring efforts, the Company
reduced its workforce by approximately 20%. (See Note 15)

     During  April  and  July  2002,   the  Company   announced   and  completed
restructuring  plans intended to better align its  operations  with the changing
market  conditions.  These plans were designed to prioritize VINA's growth areas
of  business,   focus  on  profit   contribution   and  reduce   expenses.   The
restructurings    includes   a   workforce   reduction   and   other   operating
reorganizations.  As a result of the restructuring  efforts, the Company reduced
its workforce by approximately 23% and 26% in April and July 2002, respectively.

     A summary of the  restructuring  benefit  and  expenses  for the year ended
December 31, 2002 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                             Stock
                                          Workforce       Compensation  Abandonment of     Capital
                                          Reductions        Benefits      Facilities      Equipment      Total
<C>                                       <C>               <C>           <C>             <C>           <C>
2000 remaining provision ..............   $    --           $    --       $    --         $    --       $    --
July 2001 provision ...................       991            (2,569)           --              --        (1,578)
Net provision utilized ................      (945)            2,569            --              --         1,624
                                          -------           -------       -------         -------       -------
2001 remaining provision ..............        46                --            --              --            46
April 2002 provision ..................       835            (1,547)          400             340            28
July 2002 provision ...................       602              (762)           35             945           820
December 2002 provision ...............        --                --           148              --           148
Net provision utilized ................    (1,483)            2,309          (485)         (1,285)         (944)
                                          -------           -------       -------         -------       -------
Balance at December 31, 2002 ..........   $    --           $    --       $    98         $    --       $    98
                                          =======           =======       =======         =======       =======
</TABLE>

Workforce reductions - These restructuring programs resulted in the reduction of
80 employees across all functions (43 in April of 2002 and 37 in July 2002). The
2001  restructuring  program  resulted  in the  reduction  of  approximately  40
employees  across all  functions.  As of  December  31,  2002,  the  Company has
disbursed the total amount related to the 2002 severance,  $1,437,000,  $945,000
related  to the 2001  severance  and have  reversed  $46,000  pertaining  to the
remaining balance from the 2001 workforce reduction.

Stock  compensation  benefits  - In  connection  with the April  2002  workforce
reduction,  the Company recorded a net benefit of $ 1,547,000.  This net benefit
resulted  from a $1,577,000  benefit for the reversal of prior period  estimated
stock compensation expense on forfeited stock options offset by $30,000 of stock
compensation  expense  resulting from the acceleration of unvested stock options
in  accordance  with employee  separation  agreements.  The July 2002  workforce
reduction  resulted in a benefit of $762,000  for the  reversal of prior  period
estimated stock compensation  expense on forfeited stock options.  The July 2001
workforce  reduction  resulted  in a benefit  of  $2,569,000.  This net  benefit
resulted froma $3.0 million  benefit for the reversal of prior period  estimated
stock  compensation  expense on forfeited  stock options,  offset by $431,000 of
stock  compensation  expense  resulting from the  acceleration of unvested stock
options in accordance with employee separation agreements.


                                       47
<PAGE>

Abandonment  of facilities - Part of the  restructuring  included the closure of
our  engineering  facilities  in Maryland and Texas in April 2002 and July 2002,
respectively. In December 2002, the Company incurred an additional restructuring
charge of $148,000 for the remaining  portion of the Maryland  lease.  (See Note
15). There were no facilities closed as part of the July 2001  restructuring and
therefore there were no associated costs.

Capital  equipment  - As a result  of the  closing  of our  Maryland  and  Texas
facilities and our reductions in headcount,  the Company  determined that it had
excess capital equipment with total book values  substantially  less than market
value. The Company finalized the dispositions in September of 2002. There was no
excess capital equipment related to the 2001 restructuring.

9. Commitments and Contingencies

     Leases - The  Company  leases  office  space under  various  noncancelable,
operating  leases that expire  through 2007.  The Company has an option to renew
the primary  facility  lease for an  additional  five years at the then  current
market rent.  Future  obligations  under the Company's  operating  leases are as
follows (in thousands):

                  Years Ending December 31:
                  2003...........................    $    467
                  2004...........................         337
                  2005...........................         430
                  2006...........................         491
                  2007...........................         292
                                                      -------
                  Lease commitments..............     $ 2,017
                                                      =======

     Rent expense  incurred under the operating  leases for, 2000, 2001 and 2002
was $703,000, $1.4 million, and $1.7 million, respectively.

     The Company  records rent expense  under  non-cancelable  operating  leases
using a straight-line method after consideration of increases in rental payments
over the lease term, and records the difference between actual payments and rent
expense as deferred rent included  within the caption other current  liabilities
in the accompanying consolidated balance sheets.

     Litigation - The high technology and  telecommunications  industry in which
the Company operates is characterized by frequent claims and related  litigation
regarding patent and other  intellectual  property rights.  The Company is not a
party to any such  litigation;  however any such  litigation in the future could
have a material adverse effect on the Company's consolidated financial position,
results of operations and cash flows.

     Purchase Commitments - The Company's contract  manufacturer has obtained or
has on order substantial  amounts of inventory to meet their revenue  forecasts.
If future  shipments  do not  utilize  the  committed  inventory,  the  contract
manufacturer  has the right to bill for any excess  component and finished goods
inventory.  The Company also has a  non-cancelable  purchase  order with a major
chip supplier for one of its critical  components.  As of December 31, 2002, the
estimated  purchase  commitments  and  non-cancelable  purchase  orders to those
companies is $1.6 million.  In August 2002,  the Company  placed $1.0 million on
deposit  with its  contract  manufacturer  as security  against  these  purchase
commitments.

     Warranty - The Company  provides a full  60-month  parts and factory  labor
warranty  against  defects in materials and  workmanship for all VINA Integrated
Access Device (IAD) product  lines.  A 12-month parts and factory labor warranty
against defects in materials and workmanship is provided for all VINA Integrated
Multi-Service  Access Platform (IMAP) product lines. All VINA-supplied  software
is also covered by a 60-month warranty for IAD products, and a 12-month warranty
for IMAP  products.  The Company  accounts  for  warranty  liability by taking a
charge in the period of shipment for the estimated  warranty  costs that will be
incurred  related  to  shipments.  A weighted  average of the cost per  warranty
transaction per product line is developed taking into  consideration:  the costs
of freight,  replacement,  rework and repair.  Estimated  returns  over time are
calculated taking into account  experience by product line. A warranty liability
is  calculated by applying the number of units under  warranty  against a factor
representing  the  likelihood  of a return  and the  estimated  cost per  return
transaction.  Actual warranty  charges are tracked and reported  separately from
other transactions.

                                       48
<PAGE>

     The  changes  in the  warranty  reserve  balances  during  the years  ended
December 31, 2002 and 2001 are as follows (in $ thousands):

                                                           2001     2002
                                                           ----     ----
Balance at beginning of year ...........................   $ 686    $ 696

Payments made under the warranty .......................     (58)    (228)

Product warranty issued for new sales ..................      88      (18)

Changes in accrual in respect of warranty periods ending     (20)     (36)
                                                           -----    -----
Balance at the end of year .............................   $ 696    $ 414
                                                           =====    =====

10. Stockholders' Equity

     Public Offering

     In August  2000,  the  Company  completed  its initial  public  offering of
3,450,000  shares of common stock at $12.00 per share, for net proceeds of $36.4
million.

     Convertible Preferred Stock

     In 1998, the Company issued 4,167 shares of Series D convertible  preferred
stock at $6.00 per share,  for which the proceeds  were not payable  until 1999,
and accordingly,  the Company established a $25,000  subscription  receivable at
December 31, 1998.

     In 1999,  the  Company  issued  an  additional  10,746  shares  of Series D
convertible preferred stock at $6.00 per share resulting in proceeds of $65,000.

     In 2000,  the  Company  issued  3,404,140  shares of  Series E  convertible
preferred stock at $7.00 per share resulting in net proceeds of $23.8 million.

     Upon  completion  of the initial  public  offering,  7,500,000  convertible
preferred shares of Series A, 3,000,000  convertible  preferred shares of Series
B,  3,000,000  convertible  preferred  shares of Series C,  790,517  convertible
preferred  shares  of Series D and  3,404,140  convertible  preferred  shares of
Series E were  converted into common stock on a one-to-one  basis,  resulting in
the  issuance  of  17,694,657  shares  of common  stock to the then  convertible
preferred stockholders.

     Restricted Common Stock

     Restricted common stock issued under certain stock purchase agreements is
subject to repurchase by the Company. The number of shares subject to repurchase
is generally reduced over a four-year vesting period. At December 31, 2000,
2001, and 2002, 433,334 shares, 260,000 shares, and 141,940 shares respectively,
were subject to repurchase.

     Stockholders' Rights Plan

     During 2001,  the Company's  Board of Directors  declared a dividend of one
preferred  share purchase right (a Right) for each  outstanding  share of common
stock,  of the Company.  Each Right entitles the  registered  holder to purchase
from the Company one  one-thousandth  of a share of Series A Preferred Stock, of
the Company, at a price of $35.00 per one one-thousandth of a share,  subject to
certain  antidilution  adjustment  provisions.   The  Rights,  as  amended,  are
exercisable  in the event  that a person,  entity or group  acquires  beneficial
ownership of 20% or more of the outstanding  shares of VINA's common stock.  The
Rights will expire on the earlier of (i) July 25, 2011,  (ii)  consummation of a
merger transaction meeting certain requirements, or (iii) redemption or exchange
of the Rights by the  Company.  At  December  31,  2002  62,080,636  Rights were
outstanding.

     Common Stock - Private Placement

     During the fourth  quarter of 2001,  the Company  completed a $14.2 million
private  placement  equity  financing.  Under the  subscription  agreement,  the
Company issued  22,150,369 shares of common stock at a weighted average price of
$0.64 per  share.  In  addition,  warrants  to acquire  7,090,000  shares of the
Company's  common  stock were  attached to the common  stock.  The  warrants are
immediately  exercisable at $1.00 per share and expire three years from the date
of  issuance or upon the  Company's  stock price  exceeding  predefined  trading
prices. All such warrants were outstanding at December 31, 2002.

     The Company allocated $2.0 million of the sales price to the warrants based
on the relative fair value of the warrants.  The fair value for the warrants was
determined  using the  Black-Scholes  option pricing model over the  contractual
term of the warrants using the following  assumptions:  stock  volatility,  75%;
risk free interest rate, 3.6% and no dividends during the expected term.

                                       49
<PAGE>

     Certain  employees  participated  in the private  placement  and  purchased
375,742  common  shares  with  120,050  attached  warrants at a price below fair
market value. The Company recorded the associated $289,000 of intrinsic value as
stock-based  compensation  in 2001.  The  intrinsic  value was  measured  as the
difference  between the equity  issuance  prices and their fair market values on
the date of issuance.

     Net Loss Per Share

     The following is a calculation of the  denominators  used for the basic and
diluted net loss per share computations (in thousands):
<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                           ------------------------
                                                          2000       2001       2002
                                                          ----       ----       ----
<S>                                                      <C>        <C>        <C>
Weighted average common shares outstanding ..........    18,927     38,239     62,098
Weighted average common shares outstanding subject to
   repurchase .......................................    (2,460)    (1,118)      (455)
                                                        -------    -------    -------
Shares used in computation, basic and diluted .......    16,467     37,121     61,643
                                                        =======    =======    =======
</TABLE>
     During all periods presented, the Company had securities outstanding, which
could  potentially  dilute  basic EPS in the  future,  but were  excluded in the
computation  of diluted EPS in such  periods,  as their  effect  would have been
antidilutive  due to the net loss  reported in such  periods.  Such  outstanding
securities  consist of the following at: December 31, 2000,  1,859,680 shares of
common stock subject to repurchase and options to purchase  10,692,788 shares of
common  stock;  December 31,  2001,  915,461  shares of common stock  subject to
repurchase  and  options  to  purchase  13,353,743  shares of  common  stock and
warrants  to purchase  7,090,000  shares of common  stock;  December  31,  2002,
141,940  shares of common stock  subject to  repurchase  and options to purchase
5,625,010  shares of common stock and warrants to purchase  7,090,000  shares of
common stock.

     Stock Plans

     In July 2000, the Company  adopted the 2000 Stock  Incentive Plan. The 2000
Stock  Incentive Plan serves as the successor  equity  incentive  program to the
Company's  1996 Stock  Option/Stock  Issuance Plan and the 1998 Stock  Incentive
Plan,  as  amended  (the  Predecessor  Plans).  Options  outstanding  under  the
Predecessor Plans on July 11, 2000 (9,071,061 shares) were incorporated into the
2000 Stock Incentive Plan. Such incorporated  options continue to be governed by
their existing terms,  which are similar to the 2000 Stock Incentive Plan. Under
the 2000 Stock  Incentive  Plan,  the Company is authorized to provide awards in
the form of  restricted  shares,  stock  units,  options  or stock  appreciation
rights. The number of shares reserved under this plan was 7,301,873 shares which
can be increased  for  repurchases  of unvested  common  shares issued under the
Predecessor  Plans up to a total share reserve of 10,000,000  shares.  The share
reserve is automatically increased on January 1 of each calendar year, beginning
in 2001, by an amount equal to the lesser of: (i) 2,500,000  shares;  (ii) 4% of
the  outstanding  shares of stock of the Company on such date; or (iii) a lesser
amount  determined  by the  Company's  Board of Directors  (2,480,550  shares on
January 1, 2002).

     Under the 2000 Stock  Incentive  Plan,  the  Company  may grant  options to
purchase or directly  issue common stock to  employees,  outside  directors  and
consultants  at prices not less than the fair market  value at the date of grant
for incentive stock options and not less than par value at the date of grant for
non-statutory  stock options.  These options generally expire ten years from the
date of grant and are generally immediately exercisable. The Company has a right
to repurchase  (at the option  exercise  price) common stock issued under option
exercises for unvested  shares.  The right of repurchase  generally  expires 25%
after  the  first 12  months  from the date of  grant  and then  ratably  over a
36-month  period.  Settlement and vesting terms for awards of restricted  stock,
stock   appreciation   rights,  and  stock  units  are  governed  by  individual
agreements.  There were no awards of restricted stock, stock appreciation rights
or stock units in 2000, 2001 and 2002.

     In May 2002,  the  Board of  Directors  approved  a Stock  Option  Exchange
Program. Under this program,  eligible employees could elect to exchange certain
outstanding  stock options with an exercise price greater than or equal to $1.00
for a new option to purchase the same number of shares of the  Company's  common
stock. The replacement  options are to be issued at least six months and one day
after the cancellation  date,  August 15, 2002, and will be issued from the 2000
Stock Option Plan. The new options will be non-statutory  stock options and will
have an exercise  price equal to closing price of the Company's  common stock on
the date prior to the  replacement  date. The new options will vest according to
the same schedule as the cancelled  options.  As of the  cancellation  date, the
Company had accepted 2,692,082 shares for exchange under the Program.  (See Note
15 for replacement options granted after year end.)

                                       50
<PAGE>

     Stock option activity under the stock plan is summarized as follows:
<TABLE>
<CAPTION>

                                                               OUTSTANDING OPTIONS
                                                               -------------------
                                                                             WEIGHTED
                                                                              AVERAGE
                                                               NUMBER        EXERCISE
                                                              OF SHARES        PRICE
                                                              ---------        -----

<S>                                                           <C>            <C>
Balances at January 1, 2000 (1,163,408 shares vested at a
   weighted average exercise price of $0.33 per share) ....     7,540,482    $   0.64
Granted (weighted average fair value of $6.53 per share) ..     7,555,391        3.47
Canceled ..................................................    (1,321,112)       1.58
Exercised .................................................    (3,081,973)       1.16
                                                               ----------
Balances at December 31, 2000 (1,463,399 shares vested at a
   weighted average exercise price of $0.643 per share) ...    10,692,788        2.37
Granted (weighted average fair value of $1.46 per share) ..     6,802,243        1.51
Canceled ..................................................    (3,122,840)       2.74
Exercised .................................................    (1,018,448)       0.48
                                                               ----------
Balances at December 31, 2001 (3,656,376 shares vested at a
   weighted average exercise price of $1.85 per share) ....    13,353,743        1.99
Granted (weighted average fair value of $0.37 per share) ..     1,770,375        0.40
Canceled ..................................................    (9,285,160)       2.20
Exercised .................................................      (213,948)       0.45
                                                               ----------
Balances at December 31, 2002 .............................     5,625,010    $   1.21
                                                               ==========
</TABLE>

     At December 31,  2002,  the Company had  13,427,116  shares  available  for
future grants under the 2000 Stock Incentive Plan.

     Additional  information  regarding options outstanding at December 31, 2002
is as follows:
<TABLE>
<CAPTION>

                                          OPTIONS OUTSTANDING                         VESTED OPTIONS
                          ------------------------------------------------   ---------------------------------
                                         WEIGHTED
                                         AVERAGE           WEIGHTED                                  WEIGHTED
                                        REMAINING          AVERAGE                                   AVERAGE
    RANGE OF                NUMBER     CONTRACTUAL         EXERCISE              NUMBER              EXERCISE
 EXERCISE PRICES         OUTSTANDING   LIFE (YEARS)         PRICE                VESTED                PRICE
 --------------          -----------   -----------         -------               ------              -------

<S>       <C>            <C>                <C>           <C>                    <C>                  <C>
  $0.13 - $0.36          1,168,964          7.8           $  0.30                624,900              $  0.20
  $0.40 - $0.61          1,335,027          8.0              0.59                900,292                 0.57
  $0.70 - $1.00          1,177,303          7.1              0.98                965,422                 0.99
  $1.03 - $1.92          1,396,082          8.3              1.55                642,193                 1.64
  $2.00 - $6.50            547,634          7.6              4.31                359,303                 4.00
                         ---------                                             ---------

  $0.13 - $6.50          5,625,010          7.8           $  1.21              3,492,110              $  1.17
                         =========                                             =========
</TABLE>

     Employee Stock Purchase Plan

     In July 2000,  the Company  adopted the 2000 Employee  Stock  Purchase Plan
(the  ESPP).  Under the ESPP,  eligible  employees  are  allowed to have  salary
withholdings  of up to 10% of their  base  compensation  to  purchase  shares of
common  stock at a price  equal to 85% of the lower of the  market  value of the
stock at the  beginning or end of defined  purchase  periods.  Offering  periods
commence on February 1 and August 1 of each year.  One million  eighty  thousand
shares  of  common  stock  are  reserved  for  issuance  under  ESPP and will be
increased  on the first day of each  fiscal  year,  the  lesser  of:  (a) 80,000
shares;  (b) 1% of the  Company's  outstanding  common  stock  on the day of the
increase;  or (c) a lesser number of shares determined by the Company's Board of
Directors (80,000 shares on January 1, 2002).


                                       51
<PAGE>

     Shares  issued  under the ESPP were  194,707 in 2002 at a weighted  average
price of $0.68 per  share.  There  were  677,544  shares  available  for  future
issuance under this plan at December 31, 2002.

     Stock-Based Compensation

     As discussed in Note 2, the Company accounts for employee stock plans under
the intrinsic  value method  prescribed by Accounting  Principles  Board Opinion
("APB")  No.  25,  Accounting  for Stock  Issued  to  Employees,  and  Financial
Accounting Standards Board Interpretation ("FIN") No. 44, Accounting for Certain
Transactions  Involving Stock Compensation (an Interpretation of APB No. 25) and
has adopted the  disclosure-only  provisions  of SFAS No.  123,  Accounting  for
Stock-Based  Compensation.  The Company  accounts for  stock-based  compensation
relating to equity instruments  issued to non-employees  based on the fair value
of options or warrants  estimated using the  Black-Scholes  model on the date of
grant in compliance  with the Emerging  Issues Task Force No. 96-18,  Accounting
for Equity Instruments that are issued to Other than Employees for Acquiring, or
in Conjunction with Selling,  Goods or Services.  Compensation expense resulting
from  non-employee  options is amortized  using the multiple  option approach in
compliance with FIN No. 28, Accounting for Stock  Appreciation  Rights and Other
Variable Stock Option or Award Plans.

     Pursuant to FIN No. 44, options assumed in a purchase business  combination
are valued at the date of acquisition at their fair value  calculated  using the
Black-Scholes  option  pricing model.  The fair value of the assumed  options is
included as part of the purchase price. The intrinsic value  attributable to the
unvested options is recorded as unearned stock-based  compensation and amortized
over the remaining vesting period of the related options. Options assumed by the
Company  related  to the  business  combination  made on behalf  of the  Company
subsequent  to July 1,  2000  (the  effective  date of FIN  No.  44)  have  been
accounted for pursuant to FIN No. 44.

     The  Company's   calculations  of  fair  value  for  employee   stock-based
compensation  were made using the  Black-Scholes  option  pricing  model,  which
requires subjective assumptions,  including expected time to exercise and future
stock price  volatility,  which  greatly  affects  the  calculated  values.  The
following weighted average  assumptions were used to calculate the fair value of
employee  awards under the Company's  option plans:  expected life, 3.2 years in
2000, 2001 and 2002; volatility, 29% in 2000, 75% in 2001 and 154% in 2002; risk
free  interest  rate,  6.4% in  2000,  4.2% in 2001  and  3.1% in  2002;  and no
dividends  during the expected term. The Company's  fair value  calculations  on
stock-based  awards  under the ESPP in 2001 and 2002  were  also made  using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions:  expected  life,  six months;  volatility,  75% in 2001 and 154% in
2002;  risk  free  interest  rate of 3.74 in 2001  and  3.05%  in  2002;  and no
dividends  during the expected term. The Company's  calculations  are based on a
multiple  option award  valuation and  amortization  approach,  which results in
accelerated  amortization  of the expense.  Forfeitures  are  recognized as they
occur.


                                       52
<PAGE>

     For purposes of pro forma disclosure under SFAS No. 123, the estimated fair
value of the options is assumed to be  amortized  to expense  over the  options'
vesting period,  using the multiple option method.  Pro forma  information is as
follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>


                                                                                 Years Ended December 31,
                                                                    ------------------------------------------------

                                                                          2000             2001             2002
                                                                          ----             ----             ----
<S>                                                                 <C>              <C>             <C>
Net loss, as reported ...........................................   $     (43,332)   $     (48,642)  $     (55,430)
 Add:  Stock-based compensation included in reported net loss,
      net of related tax effects ................................          23,534            9,747           1,273
Less:  Stock-based compensation expense determined under the fair
      value method for all awards, net of related tax effects ...         (24,426)         (15,503)         (1,019)
                                                                    -------------    -------------   -------------
Pro forma net loss ..............................................   $     (44,224)   $     (54,398)  $     (55,176)
                                                                    =============    =============   =============
Net loss per share, as reported - basic and diluted .............   $       (2.63)   $       (1.31)  $       (0.90)
                                                                    =============    =============   =============
Pro forma net loss per share - basic and diluted ................   $       (2.69)   $       (1.47)          (0.90)
                                                                    =============    =============   =============
</TABLE>

11. Income Taxes

     The  Company  recorded  no income tax  benefit or  provision  in any of the
periods presented.  The difference between the recorded amounts is reconciled to
the federal statutory rate as follows (in thousands):
<TABLE>
<CAPTION>

                                                                        2000        2001         2002
                                                                        ----        ----         ----
         <S>                                                          <C>         <C>          <C>
          Federal statutory tax benefit at 35%..................     $ (15,166)  $ (17,025)   $ (19,401)
          State tax benefit.....................................        (2,490)       (800)      (1,123)
          Research and development credits......................          (774)       (400)          --
          Nondeductible stock compensation......................         9,848       4,249          447
          In process research and development...................            --       2,043           --
          Amortization of goodwill and intangible assets........            --       3,313           --
          Impairment of goodwill                                            --          --        9,562
          Change in valuation allowance.........................         8,973       8,040       11,463
          Other.................................................          (391)        580         (948)
                                                                     ---------   ---------    ----------
          Income taxes..........................................     $      --   $      --    $      --
                                                                     =========   =========    =========
</TABLE>

     The components of net deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                       December 31,
                                                                    2001          2002
                                                                -----------   --------
         <S>                                                    <C>          <C>
          Deferred tax assets:
           Accruals and reserves not currently deductible...     $   2,730    $    1,661
           Net operating loss carryforwards.................        26,492        37,313
           Tax credit carryforwards.........................         2,423         2,769
           Identified acquisition intangibles...............        (1,626)           --
           Other............................................           937           676
                                                                 ---------     ---------
                                                                    30,956        42,419
          Valuation allowance...............................       (30,956)      (42,419)
                                                                 ---------    -----------

          Net deferred tax assets...........................     $      --    $       --

                                                                 =========     =========
</TABLE>

     Due to the Company's lack of earnings history,  the net deferred tax assets
have been  fully  offset  by a  valuation  allowance.  The  valuation  allowance
increased by approximately $11.5 million during 2002.


                                       53
<PAGE>

     As of December 31, 2002,  the Company had  available for  carryforward  net
operating  losses for federal  and state  income tax  purposes of  approximately
$98.0  million  and  $36.0  million,   respectively.  Net  operating  losses  of
approximately  $1.3  million and  $800,000  for federal and state tax  purposes,
respectively,  attributable  to the tax  benefit  relating  to the  exercise  of
nonqualified  stock options and  disqualifying  dispositions  of incentive stock
options are excluded from the components of deferred income tax assets.  The tax
benefit  associated  with  this  net  operating  loss  will  be  recorded  as an
adjustment to stockholders'  equity when the Company  generates  taxable income.
Federal net operating loss carryforwards  will expire, if not utilized,  in 2011
through  2022.  State net  operating  loss  carryforwards  will  expire,  if not
utilized, in 2006 through 2014.

     As of  December  31,  2002,  the  Company had  available  for  carryforward
research  and  experimentation  tax credits  for  federal  and state  income tax
purposes of approximately $1.5 million and $1.6 million,  respectively.  Federal
research and  experimentation  tax credit  carryforwards  expire in 2011 through
2022. The Company also had  approximately  $300,000 in California  manufacturers
investment credits.

     Current federal and California tax laws include substantial restrictions on
the  utilization  of net  operating  losses  and tax  credits in the event of an
"ownership change" of a corporation.  Use of approximately  $14.0 million of the
net  operating  loss  carryforward  of Woodwind from periods prior to the merger
with the  Company  is  limited  to  approximately  $2.7  million  per year.  The
Company's   ability  to  utilize  other  net  operating   loss  and  tax  credit
carryforwards may be further limited as a result of an ownership change.  Such a
limitation  could  result in the  expiration  of  carryforwards  before they are
utilized.

12. Customer Concentrations

     The following  table  summarizes  net revenue and accounts  receivable  for
customers which accounted for 10% or more of accounts receivable or net revenue:

                         Accounts Receivable                Net Revenue
                         -------------------                -----------
                            December 31,             Years Ended December 31,
                            ------------             ------------------------

       CUSTOMER           2001       2002         2000       2001       2002
    -------------        ------     ------       ------     ------     ------
    A...............       23%        --           --         --         --
    B...............       12%        27%          31%        44%        18%
    C...............       --         17%          --         --         --
    D...............       32%        21%          --         --         37%
    E...............       28%        26%          28%        21%        16%
    F...............       --         --           --         12%        --

13. Employee Benefit Plan

     The  Company  has a  401(k)  tax  deferred  savings  plan  to  provide  for
retirement  of employees  meeting  certain  eligibility  requirements.  Employee
contributions  are limited to 20% of their  annual  compensation  subject to IRS
annual limitations.  The Company may make contributions at the discretion of the
Board of Directors.  There were no discretionary  employer  contributions to the
401(k) plan in 2000, 2001, or 2002.

14. Segment Information

     As defined by the requirements of SFAS No. 131,  Disclosures About Segments
of an Enterprise and Related Information, the Company operates in one reportable
segment: the design,  development,  marketing and sale of multiservice broadband
access communications equipment.  International sales were insignificant for all
periods  presented.  The Company's chief  operating  decision maker is its chief
executive officer.

15. Subsequent Events

As of December  31,  2002,  the Company  had a  certificate  of deposit for $3.0
million that  secured a $3.0  million  committed  revolving  line of credit.  In
January 2003, the Company  remitted full payment for the $3.0 million  revolving
line of credit.

In January  2003,  the Company  announced  and  completed a  restructuring  plan
intended  to better  align its  operations  with the  continued  decline  in the
telecommunications   market.   This  plan  was   designed  to  focus  on  profit
contribution  and  reduce  expenses.  The  restructuring  includes  a  workforce
reduction with related severance and outplacement of approximately $296,000. The
restructuring  has been accounted for in accordance  with the provisions of SFAS
No. 146.

                                       54
<PAGE>

On February 17, 2003, the Company granted 2,601,982 option grants as part of the
Stock Option  Exchange  Program  approved by the Board of Directors in May 2002.
Under this program, eligible employees were able to make an election to exchange
certain  outstanding  stock option grants with an exercise price greater than or
equal to $1.00 for a new option to  purchase  the same  number of shares of VINA
Technologies Inc. common stock. The replacement option was issued per the Option
Exchange Program at least six months and one day after the cancellation  date of
August 15,  2002.  The new options  were issued  from the  Company's  2000 Stock
Option Plan and are non-statutory stock options.  The individuals  participating
in this program were  employees of VINA  Technologies,  Inc. on the  replacement
grant  date  making  them  eligible  to  receive  the  new  stock  options.   No
consideration  for the  canceled  stock  options  was  provided  to  individuals
terminating  employment prior to the replacement  grant date. The new option has
an exercise  price of $0.16,  which is equal to VINA  Technologies  Inc.  common
stock's closing price on the date prior to the replacement  grant. The new stock
options will continue to vest on the same schedule as the canceled options.

In February  2003, the Company  reached a settlement  agreement to terminate the
lease for its Maryland  facility.  Actual lease  termination  costs are $98,000,
which  has  resulted  in a  change  in  estimate  of the  restructuring  charges
originally  accrued as of December  31,  2002.  The  decrease  in  restructuring
reserves of $318,000 has been reflected in the consolidated financial statements
as of December 31, 2002.

In February  2003,  the Company  established an asset secured credit line with a
bank for up to $3.5 million.  The Company needs to meet monthly  covenants to be
able to borrow against this credit line and can meet them currently.  The credit
line  has a  one-year  duration  and has  terms of  prime  plus 2%.  There is no
outstanding balance on this credit line.

16. Selected Consolidated Quarterly Financial Results (Unaudited)

     The following  tables set forth  selected  unaudited  quarterly  results of
operations for the years ended December 31, 2001 and 2002 (in thousands,  except
per share amounts).  In the opinion of management,  such un-audited  information
includes  all  adjustments  (consisting  only of normal  recurring  adjustments)
necessary for a fair presentation of the interim information.
<TABLE>
<CAPTION>

                                                                   Quarter Ended
                                 ---------------------------------------------------------------------------------
                                 Mar. 31,  June 30,  Sept. 30, Dec. 31,  Mar. 31,  June 30,  Sept. 30, Dec. 31,
                                   2001      2001      2001      2001      2002      2002      2002      2002
                                 -------   -------   --------  --------  -------   -------   --------  --------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>        <C>
Net revenue .....................$ 11,029  $ 12,028  $ 13,010  $  9,045  $  6,439  $ 6,624   $  6,035   $  6,045

Gross profit (excluding
   stock-based compensation) ....   2,783     4,958     5,211     3,446       314    2,463      2,480      2,352

Loss from operations ............ (19,188)  (12,378)   (7,496)  (10,963)  (41,165)  (5,566)    (6,957)    (1,938)
Net loss ........................ (18,576)  (11,998)   (7,219)  (10,849)  (41,093)  (5,482)    (6,934)    (1,921)
Net loss per share, basic and
   diluted ......................$  (0.57) $  (0.34) $  (0.20) $  (0.25) $  (0.67) $ (0.09)  $  (0.11)  $  (0.03)
Shares used in computation, basic
   and diluted ..................  32,783    35,589    36,139    43,974    61,531   61,546     61,623     61,871

</TABLE>

Item  9.  Changes  In and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

     Not applicable.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The information  required by this item (with respect to  identification  of
directors  and  with  respect  to  delinquent  filers  pursuant  to Item  405 of
Regulation  S-K) is  incorporated  by reference from the  information  under the
caption  "Election  of  Directors"  and  "Section  16(a)  Beneficial   Ownership
Reporting Compliance," respectively,  contained in the Company's Proxy Statement
to be filed with the Securities and Exchange  Commission in connection  with the
solicitation  of proxies for the Company's 2003 Annual  Meeting of  Stockholders
(the "Proxy Statement").  For information with respect to the executive officers
of the Company, see "Executive Officers" at the end of Part I of this report.


                                       55
<PAGE>

Item 11. Executive Compensation

     The information required by this item is incorporated by reference from the
information  under the  captions  "Election  of  Directors  --  Compensation  of
Directors,"  and  "Executive  Compensation"  contained  in the  Company's  Proxy
Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required by this item is incorporated by reference from the
information under the captions "Security  Ownership of Certain Beneficial Owners
and Management" contained in the Company's Proxy Statement.

Item 13. Certain Relationships and Related Transactions

     The information required by this item is incorporated by reference from the
information contained under the caption "Certain Transactions"  contained in the
Company's Proxy Statement

                                     PART IV

Item 14. Controls and Procedures

     (a)  Evaluation  of  disclosure  controls  and  procedures.  Based on their
evaluation  as of a date within 90 days of the filing date of this Annual Report
on Form 10-K, the Company's  principal executive officer and principal financial
officer have concluded that the Company's disclosure controls and procedures (as
defined in Rules  13a-14(c) and 15d-14(c)  under the Securities  Exchange Act of
1934 (the "Exchange Act")) are effective to ensure that information  required to
be  disclosed  by the  Company  in reports  that it files or  submits  under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods specified in Securities and Exchange Commission rules and forms.

     (b) Changes in internal controls.  There were no significant changes in the
Company's internal controls or in other factors that could significantly  affect
these  controls  subsequent  to the  date of  their  evaluation,  including  any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a) Documents filed as part of this report:

          (1) Consolidated Financial Statements

     Reference is made to the Index to Consolidated Financial Statements of VINA
Technologies, Inc., under Item 8 of Part II hereof.

          (2) Consolidated Financial Statement Schedule

     The  following  consolidated  financial  statement is filed as part of this
registration  statement and should be read in conjunction  with the consolidated
financial statements.

                                                                       Page
                                                                       ----

     Schedule II-- Valuation & Qualifying Accounts                      62

     Schedules other than those referred to above have been omitted because they
are not  applicable  or not  required  or because  the  information  is included
elsewhere in the consolidated financial statements or the notes thereto.

     (3) Exhibits

     See Item 15(c) below.  Each  management  contract or  compensatory  plan or
arrangement required to be filed has been identified.

(b) Reports on Form 8-K.

     The Company  filed no reports on Form 8-K during the fiscal  quarter  ended
December 31, 2002.


                                       56
<PAGE>

(c)
    Exhibit
    Number                 Description of Document
    ------                 -----------------------
     2.1  Agreement  and Plan of Merger,  dated as of October 30,  2000,  by and
          among the Registrant,  WCS Acquisition  Subsidiary,  Inc. and Woodwind
          Communications Systems, Inc. (incorporated by reference to Exhibit 2.1
          to the  Company's  Quarterly  Report  on  Form  10-Q  filed  with  the
          Securities  and  Exchange  Commission  on  March  5,  2001  (File  No.
          000-31903)).

     2.2  Agreement  and Plan of  Merger,  dated as of October  17,  2001 by and
          between the Registrant and MOS Acquisition  Corporation  (incorporated
          by  reference  to the  exhibit  of the same  number  to the  Company's
          Registration  Statement  of Form S-1  filed  with the  Securities  and
          Exchange Commission on February 15, 2002 (File No. 833-82870)).

     3(i) Amended  and  Restated  Certificate  of  Incorporation  of  Registrant
          (incorporated   by  reference  to  Exhibit  3(i).2  to  the  Company's
          Registration Statement on Form S-1 (File No. 333-36398)).

    3(ii) Bylaws of the  Registrant,  as amended  (incorporated  by reference to
          Exhibit  3(ii).2 to the Company's  Registration  Statement on Form S-1
          (File No. 333-36398)).

     4.1  Form of Common  Stock  Certificate  (incorporated  by reference to the
          exhibit of the same number to the Company's  Registration Statement on
          Form S-1 (File No. 333-36398)).

    4.2.1 Rights  Agreement  dated  as of  July  25,  2001  by and  between  the
          Registrant and American  Stock Transfer & Trust Company  (incorporated
          by reference to Exhibit 4.1 of the Company's Registration Statement on
          Form 8-A filed with the Securities and Exchange Commission on July 25,
          2001 (File No. 000-31903)).

    4.2.2 Amendment  No. 1 to Rights  Agreement  dated as of October 17, 2001 by
          and between the Registrant and American Stock Transfer & Trust Company
          (incorporated  by reference to Exhibit 4.1 to the Company's  Amendment
          No. 1 to Registration  Statement on Form 8-A filed with the Securities
          and Exchange Commission on October 24, 2001 (File No. 000-31903)).

    4.3.1 Securities  Purchase  Agreement  dated as of October  17,  2001 by and
          among the Registrant and the Investors named therein  (incorporated by
          reference to Exhibit 99.2 to the Company's  Current Report on Form 8-K
          filed with the Securities and Exchange  Commission on October 24, 2001
          (File No. 000-31903)).

    4.3.2 Securities  Purchase  Agreement  dated as of October  19,  2001 by and
          between the Registrant and Whitman  Partners,  L.P.  (incorporated  by
          reference to Exhibit 99.3 to the Company's  Current Report on Form 8-K
          filed with the Securities and Exchange  Commission on October 24, 2001
          (File No. 000-31903)).

     4.4  Stockholders'  Agreement dated as of October 17, 2001 by and among the
          Company and the  stockholders  listed on the  signature  pages thereto
          (incorporated  by  reference to Exhibit 4.2 to the  Company's  Current
          Report on Form 8-K filed with the Securities  and Exchange  Commission
          on October 24, 2001 (File No. 000-31903)).

     4.5  Form  of  Common  Stock  Purchase   Warrant  issued  to  investors  in
          connection with the securities  purchase  agreements  (incorporated by
          reference to Exhibit 99.5 to the Company's  Current Report on Form 8-K
          filed with the Securities and Exchange  Commission on October 24, 2001
          (File No. 000-31903)).

    10.1* 1996 Stock Plan and form of  agreements  thereunder  (incorporated  by
          reference  to  the  exhibit  of  the  same  number  to  the  Company's
          Registration Statement on Form S-1 (File No. 333-36398)).

  10.1.2* Amended  and  Restated  1998  Stock  Plan and  form of  agreements
          thereunder  (incorporated  by  reference  to the  exhibit  of the same
          number to the Company's  Registration  Statement on Form S-1 (File No.
          333-36398)).

  10.1.3* 2000 Employee Stock Purchase Plan (incorporated by reference to the
          exhibit of the same number to the Company's  Registration Statement on
          Form S-1 (File No. 333-36398)).

  10.1.4* 2000 Stock Incentive Plan (incorporated by reference to the exhibit
          of the same number to the Company's Registration Statement on Form S-1
          (File No. 333-36398)).

  10.1.5* Agreement  under the 2000 Stock  Incentive  Plan  (incorporated  by
          reference  to  the  exhibit  of  the  same  number  to  the  Company's
          Registration Statement on Form S-1 (File No. 333-36398)).


                                       57
<PAGE>

    10.2+ General  Agreement for the Procurement of Products and Service and the
          Licensing of Software  dated April 28, 1999 between the Registrant and
          Lucent Technologies, Inc. (incorporated by reference to the exhibit of
          the same number to the  Company's  Registration  Statement on Form S-1
          (File No. 333-36398)).

    10.3* Indemnification  Agreement between the Registrant and its officers and
          directors  (incorporated by reference to Exhibit 10.6 to the Company's
          Registration Statement on Form S-1 (File No. 333-36398)).

  10.4.1* Offer  letter by and  between  the  Registrant  and Thomas J. Barsi
          dated July 1, 1996  (incorporated  by  reference to the exhibit of the
          same number to the Company's  Registration Statement of Form S-1 filed
          with the Securities and Exchange Commission on February 15, 2002 (File
          No. 833-82870)).

 10.4.2*  Offer  letter  by  and  between  the  Registrant  and  Stanley  E.
          Kazmierczak  dated May 24,  1999  (incorporated  by  reference  to the
          exhibit of the same number to the Company's  Registration Statement of
          Form S-1 filed with the Securities and Exchange Commission on February
          15, 2002 (File No. 833-82870)).

  10.4.3* Offer  letter by and  between the  Registrant  and Steven M. Bauman
          dated August 16, 1999 (incorporated by reference to the exhibit of the
          same number to the Company's  Registration Statement of Form S-1 filed
          with the Securities and Exchange Commission on February 15, 2002 (File
          No. 833-82870)).

  10.4.4* Offer  letter by and between  the  Registrant  and T. Diane  Pewitt
          dated  January 21, 2000  (incorporated  by reference to the exhibit of
          the same number to the  Company's  Registration  Statement of Form S-1
          filed with the Securities and Exchange Commission on February 15, 2002
          (File No. 833-82870)).

  10.4.5* Offer letter by and between the Registrant and C. Reid Thomas dated
          April 7, 2000  (incorporated  by  reference to the exhibit of the same
          number to the Company's  Registration Statement of Form S-1 filed with
          the Securities and Exchange  Commission on February 15, 2002 (File No.
          833-82870)).

  10.4.6* Offer  letter by and  between  the  Registrant  and Julie P. Cotton
          dated June 8, 2000  (incorporated  by  reference to the exhibit of the
          same number to the Company's  Registration Statement of Form S-1 filed
          with the Securities and Exchange Commission on February 15, 2002 (File
          No. 833-82870)).

    10.5* Settlement  Agreement  and Release by and between the  Registrant  and
          Joshua W. Soske dated July 17, 2001  (incorporated by reference to the
          exhibit of the same number to the Company's  Registration Statement of
          Form S-1 filed with the Securities and Exchange Commission on February
          15, 2002 (File No. 833-82870)).

     24.1 Power of Attorney (see page 59 of this Form 10-K).

+    Confidential treatment has been granted with respect to certain portions of
     this agreement.

*    Indicates management contract or compensatory plan or arrangement.

Schedules not listed above have been omitted because the information required to
be set forth therein is not  applicable or is shown in the financial  statements
or notes thereto.






                                       58
<PAGE>


                                   Signatures

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized in the City of Newark,
State of California on the 17th day of March 2003.

                                              VINA TECHNOLOGIES, INC.

                                              By  /s/ W. MICHAEL WEST
                                                 -------------------------------
                                                 W. Michael West
                                                 Chairman of the Board and
                                                 Chief Executive Officer

     KNOW ALL  PERSONS  BY THESE  PRESENTS,  that each  person  whose  signature
appears  below   constitutes  and  appoints  W.  Michael  West  and  Stanley  E.
Kazmierczak, and each of them, his true and lawful attorneys-in-fact and agents,
each with full  power of  substitution  and  resubstitution,  for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this report on Form 10-K,  and to file the same,  with  exhibits  thereto and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission,  granting unto said  attorneys-in-fact and agents, and each of them,
full  power  and  authority  to do and  perform  each and  every  act and  thing
requisite  and  necessary to be done, as fully to all intents and purposes as he
might or could do in person,  hereby  ratifying and  confirming all that each of
said  attorneys-in-fact  and  agents  or their  substitute  or  substitutes  may
lawfully do or cause to be done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

          Name                               Title                                Date
          ----                               -----                                ----


<S>                               <C>                                           <C>
/s/ W. Michael West               Chairman of the Board and Chief Executive     March 17, 2003
-----------------------------     Officer (Principal Executive Officer)
W. Michael West


/s/ Stanley E. Kazmierczak        Vice President, Finance and Administration    March 17, 2003
-----------------------------     and Chief Financial Officer (Principal
Stanley E. Kazmierczak            Financial and Accounting Officer)


/s/ Jeffrey M. Drazan             Director                                      March 17, 2003
-----------------------------
Jeffrey M. Drazan


/s/ John F. Malone                Director                                      March 17, 2003
-----------------------------
John F. Malone


/s/ Philip J. Quigley             Director                                      March 17, 2003
-----------------------------
Philip J. Quigley


/s/ Paul Scott                    Director                                      March 17, 2003
-----------------------------
Paul Scott


/s/ Joshua W. Soske               Director                                      March 17, 2003
-----------------------------
Joshua W. Soske

</TABLE>

                                       59
<PAGE>


                                 Certifications


     I, W. Michael West, certify that:

     1. I have reviewed  this annual  report on Form 10-K of VINA  Technologies,
Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this anual  report,  fairly  present  in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 17, 2003

By: /s/ W. Michael West
    --------------------
    W. Michael West
    Chief Executive Officer
    (Principal Executive Officer)


                                       60
<PAGE>


     I, Stanley E. Kazmierczak, certify that:

     1. I have reviewed  this annual  report on Form 10-K of VINA  Technologies,
Inc.;

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date:  March 17, 2003

By: /s/ Stanley E. Kazmierczak
    --------------------------
    Stanley E. Kazmierczak
    Chief Financial Officer
    (Principal Financial and Accounting Officer)


                                       61
<PAGE>


                             VINA TECHNOLOGIES, INC.

                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                      Balance at      Charged to    Deductions-
                                                     beginning of      costs and    write-offs     Balance at
                                                        period         expenses     of account    end of period
                                                     ------------    -----------   ----------------------------

Allowance for doubtful accounts and sales returns
Year ended
<S>                                                    <C>             <C>            <C>             <C>
 December 31, 2002                                      $ 457           $ 272          $ 484           $ 245
 December 31, 2001                                        335             222            100             457
 December 31, 2000                                        221             131             17             335


Accrued warranty:
Year ended
 December 31, 2002                                      $ 696           $ (54)         $ 228           $ 414
 December 31, 2001                                        686              68             58             696
 December 31, 2000                                        449             393            156             686


Inventory reserves:
Year ended
 December 31, 2002                                      $ 463           $  60          $ 243           $ 280
 December 31, 2001                                        110             577            224             463
 December 31, 2000                                         90              31             11             110

</TABLE>








                                       62